##### Table of Contents





UNITED STATES SECURITIES AND
    EXCHANGE COMMISSION
 Washington, D.C.
    20549
 Form 20-F
  (Mark One)o

REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g)
    OF THE SECURITIES EXCHANGE ACT OF 1934ORþ

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)  OF THE
    SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended
    February 27, 2011ORo

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)  OF
    THE SECURITIES EXCHANGE ACT OF 1934ORo

SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d)  OF
    THE SECURITIES EXCHANGE ACT OF 1934   Commission file number
    333-171863
  STRATUS TECHNOLOGIES BERMUDA
    HOLDINGS LTD.
 (Exact name of Registrant as
    specified in its charter)
 N/A
 (Translation of
    Registrants name into English)
 Bermuda
 (Jurisdiction of incorporation
    or organisation)
  Cumberland House,
    9th Floor
 One Victoria Street, Hamilton HM
    11, Bermuda
 (Address of principal executive
    offices)
  Ernest A. Morrison
 Address: Cumberland House, 9th
    Floor
 One Victoria Street, Hamilton HM
    11, Bermuda
 Phone: (441)
    295-4630
 Facsimile: (441)
    292-7880
 (Name, Telephone,
    E-mail
    and/or Facsimile number and Address of Company Contact
    Person)
  Securities registered or to be registered pursuant to
    Section 12(b) of the Act.
  Title of Each Class

Name of Each Exchange on Which RegisteredNone

N/A  Securities registered or to be
    registered pursuant to Section 12(g) of the Act.
 None
 (Title of Class)
 Securities for which there is a
    reporting obligation pursuant to Section 15(d) of the
    Act.
  Guaranty of the $480 Principal Amount of 12% Senior
    Secured Notes due 2015 of Stratus Technologies Bermuda Ltd.; and
 Guaranty of the $520 Principal
    Amount of 12% Senior Secured Notes due 2015 of Stratus
    Technologies, Inc.
 (Title of Class)
  Indicate the number of outstanding shares of each of the
    issuers classes of capital or common stock as of the close
    of the period covered by the annual report.
 10,093,146.62 preference shares,
    par value $1.50 per share, and
 44,320,789.38 ordinary (common)
    shares, par value $0.5801 per share
  Indicate by check mark if the registrant is a well-known
    seasoned issuer, as defined in Rule 405 of the Securities
    Act.  Yes o     No þ
  If this report is an annual or transition report, indicate by
    check mark if the registrant is not required to file reports
    pursuant to Section 13 or 15(d) of the Securities Exchange
    Act of
    1934.  Yes o     No þ
  Note  Checking the box above will not relieve any
    registrant required to file reports pursuant to Section 13
    or 15(d) of the Securities Exchange Act of 1934 from their
    obligations under those Sections.
  Indicate by check mark whether the registrant (1) has
    filed all reports required to be filed by Section 13 or
    15(d) of the Securities Exchange Act of 1934 during the
    preceding 12 months (or for such shorter period that the
    registrant was required to file such reports), and (2) has
    been subject to such filing requirements for the past
    90 days.  Yes o     No* þ
  Indicate by check mark whether the registrant is a large
    accelerated filer, an accelerated filer, or a non-accelerated
    filer. See definition of accelerated filer and large
    accelerated filer in
    Rule 12b-2
    of the Exchange Act. (Check one):
  Large accelerated
    filer o

Accelerated
    filer o

Non-accelerated
    filer þ   Indicate by check mark which basis of accounting the
    registrant has used to prepare the financial statements included
    in this filing:
  U.S.
    GAAP þ

International Financial Reporting Standards as issued
    by the International Accounting Standards
    Board o

Other o   If
    Other has been checked in response to the previous
    question, indicate by check mark which financial statement item
    the registrant has elected to follow.
    
    Item 17 o
         Item 18 o  If this is an annual report, indicate by check mark whether
    the registrant is a shell company (as defined in
    Rule 12b-2
    of the Exchange
    Act).  Yes o     No þ
  (APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
    PROCEEDINGS DURING THE PAST FIVE YEARS)
  Indicate by check mark whether the registrant has filed all
    documents and reports required to be filed by Sections 12,
    13 or 15(d) of the Securities Exchange Act of 1934 subsequent to
    the distribution of securities under a plan confirmed by a
    court.  Yes o     No o
 *
    
    The registrant became subject to
    the filing requirements of Section 15(d) of the Securities
    Exchange Act of 1934 on April 18, 2011. The registrant has
    filed all reports required to be filed by Section 13 or
    15(d) of the Securities Exchange Act of 1934 since that date.




---



##### 





TABLE OF
    CONTENTS
   
 PageINTRODUCTION AND USE OF CERTAIN TERMS


1MARKET AND INDUSTRY DATA


1TRADE NAMES AND TRADEMARKS


1CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING
    INFORMATION


2PART I


4ITEM 1.


IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND
    ADVISORS


4ITEM 2.


OFFER STATISTICS AND EXPECTED TIMETABLE


4ITEM 3.


KEY INFORMATION


4ITEM 4.


INFORMATION ON THE COMPANY


24ITEM 5.


OPERATING AND FINANCIAL REVIEW AND PROSPECTS


39ITEM 6.


DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES


66ITEM 7.


MAJOR SHAREHOLDERS AND RELATED PARTY
    TRANSACTIONS


71ITEM 8.


FINANCIAL INFORMATION


74ITEM 9.


THE OFFER AND LISTING


74ITEM 10.


ADDITIONAL INFORMATION


75ITEM 11.


QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
    MARKET RISK


78ITEM 12.


DESCRIPTION OF SECURITIES OTHER THAN EQUITY
    SECURITIES


78PART II


78ITEM 13.


DEFAULTS, DIVIDEND ARREARAGES AND
    DELINQUENCIES


78ITEM 14.


MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY
    HOLDERS AND USE OF PROCEEDS


78ITEM 15.


CONTROLS AND PROCEDURES


79ITEM 16A.


AUDIT COMMITTEE FINANCIAL EXPERTS


79ITEM 16B.


CODE OF ETHICS


79ITEM 16C.


PRINCIPAL ACCOUNTANT FEES AND SERVICES


79ITEM 16D.


EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT
    COMMITTEES


80ITEM 16E.


PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND
    AFFILIATED PURCHASERS


80ITEM 16F.


CHANGE IN REGISTRANTS CERTIFYING
    ACCOUNTANT


80ITEM 16G.


CORPORATE GOVERNANCE


80PART III


81ITEM 17.


FINANCIAL STATEMENTS


81ITEM 18.


FINANCIAL STATEMENTS


81ITEM 19.


EXHIBITS


81SIGNATURES


83ITEM 18.


FINANCIAL STATEMENTS


84EX-7EX-11EX-12.1EX-12.2EX-13   i




---



##### Table of Contents



INTRODUCTION
    AND USE OF CERTAIN TERMS           MARKET
    AND INDUSTRY DATA     TRADE
    NAMES AND TRADEMARKS  ® ® ® tm ® ®
 1




---



##### Table of Contents



CAUTIONARY
    STATEMENT REGARDING FORWARD-LOOKING INFORMATION      
    the continued acceptance of our products by the market;
    our ability to enter into new service agreements and to retain
    customers under existing service contracts;
    our ability to source quality components and key technologies
    without interruption and at acceptable prices;
    our ability to comply with certain covenants in our Revolving
    Credit Facility, our Second Lien Credit Facility and the
    indenture governing the Units and underlying Notes;
    our ability to refinance indebtedness when required;
    our reliance on sole source manufacturers and suppliers;
    the presence of existing competitors and the emergence of new
    competitors;
    our financial condition and liquidity and our leverage and debt
    service obligations;
    economic conditions globally and in our most important markets;
    developments in the fault-tolerant and high-availability server
    markets;
    claims by third parties that we infringe upon their intellectual
    property rights;
    our success in adequately protecting our intellectual property
    rights;
    our success in maintaining efficient manufacturing and logistics
    operations;
    our ability to recruit, retain and develop appropriately skilled
    employees;
    exposure for systems and service failures;
    fluctuations in foreign currency exchange rates;
    fluctuations in interest rates;
    current risks of terrorist activity and acts of war;
    impact of changing tax laws;
    the impact of changes in policies, laws, regulations or
    practices of foreign governments on our international operations;
    impact of natural or man-made disasters; and
    the other factors discussed in Item 3. Key
    Information  D. Risk Factors in this annual
    report. 2




---



##### Table of Contents



3




---



##### Table of Contents



PART I  ITEM 1.
    IDENTITY
    OF DIRECTORS, SENIOR MANAGEMENT AND ADVISORS    ITEM 2.
    OFFER
    STATISTICS AND EXPECTED TIMETABLE    ITEM 3.
    KEY
    INFORMATION  A.
    Selected
    Financial Data    4




---



##### Table of Contents



Fiscal Year EndedFebruary 27,


February 28,


February 22,


February 24,


February 25,2011


2010


2009


2008


2007(Dollars in thousands)Statement of Operations Data:RevenueProduct

$
71,104


$
66,714


$
92,362


$
106,485


$
113,073Service


135,091



137,699



150,662



152,301



146,710Total revenue


206,195



204,413



243,024



258,786



259,783Total cost of revenue


91,251



91,577



114,477



129,856



129,533Gross profit


114,944



112,836



128,547



128,930



130,250Total operating expenses


76,167



81,681



107,011



104,165



122,091Profit from operations


38,777



31,155



21,536



24,765



8,159Interest income


80



461



235



247



207Interest expense


(43,728
)


(25,307
)


(32,820
)


(36,153
)


(32,799
)Loss on extinguishment of debt


(3,751
)














Other (expense) income, net


(1,751
)


1,920



918



65



(20,506
)(Loss) income before income taxes


(10,373
)


8,229



(10,131
)


(11,076
)


(44,939
)Provisions for income taxes


1,520



1,584



2,132



427



1,290Net (loss) earnings

$
(11,893
)

$
6,645


$
(12,263
)

$
(11,503
)

$
(46,229
)Balance Sheet Data:AssetsCash and cash equivalents

$
28,100


$
56,768


$
35,025


$
13,467


$
7,733Property and equipment, net


13,695



16,841



21,507



29,063



21,497Total Assets


123,854



150,270



149,225



159,022



161,604Liabilities, redeemable convertible preferred stock and
    stockholders deficitCurrent portion of long term debt


5,000



25,000



2,000



2,000



2,000Accrued expenses


25,611



17,706



30,433



31,949



34,952Short-term deferred revenue


36,199



42,029



39,025



40,169



40,184Long-term debt, net of discount(1)


249,069



291,906



316,144



304,385



297,000Deferred revenue and other long-term liabilities


12,170



9,892



8,158



10,954



6,071Embedded derivatives


18,955















Total redeemable convertible preferred stock


161,042



93,612



86,678



80,257



74,312Total stockholders deficit


(391,768
)


(337,731
)


(344,622
)


(326,772
)


(307,092
)Cash Flow Data:Net cash provided by (used in) operating activities

$
19,749


$
29,979


$
17,589


$
15,690


$
(12,066
)Net cash used in investing activities


(2,769
)


(4,950
)


(4,597
)


(14,787
)


(13,421
)Net cash (used in) provided by financing activities


(46,234
)


(5,267
)


8,861



5,466



14,579Other Financial Data:Legacy product revenue

$
21,821


$
24,813


$
29,019


$
46,924


$
57,831ftServer product revenue


48,137



41,738



63,324



59,561



55,242Avance product revenue


1,146



163



19







Depreciation and amortization


9,147



12,580



16,559



14,694



19,821Capital expenditures


6,238



5,773



6,388



14,370



10,143Other Data (unaudited)Ratio of earnings to fixed charges(2)(3)


0.8
x


1.3
x


0.7
x


0.7
x


     (1)
    
    Includes all long-term obligations (including long-term debt and
    capital leases (if any) as defined in
    Rule S-02
    (28)(a) of Regulations S-X). 5




---



##### Table of Contents



(2)
    
    The ratio of earnings to fixed charges is computed by dividing
    earnings by fixed charges. For this purpose,
    earnings include net (loss) income before taxes and
    fixed charges. Fixed charges include interest
    expense, amortization of debt expense and one third of rental
    expense deemed to be representative of the interest factor in
    these rentals. For fiscal 2011, fiscal 2009, fiscal 2008 and
    fiscal 2007, earnings before fixed charges were insufficient to
    cover fixed charges by approximately $10.4 million,
    $10.1 million, $11.1 million and $44.9 million,
    respectively.(3)
    
    For the year ended February 25, 2007, we recognized an
    earnings net loss as defined in (2) above and as a result,
    the ratio of earnings to fixed charges has not been presented
    for that period.  B.
    Capitalization
    and Indebtedness    C.
    Reasons
    for the Offer and Use of Proceeds    D.
    Risk
    Factors    Risks
    Related to Our Business
  period-to-period
  We
    have experienced significant declines in revenue generated by
    sales of our legacy products, which include Continuum and
    V-Series systems, and we expect revenue generated by sales of
    our Continuum and V-Series systems to continue to decline in the
    future. If revenue generated by sales of our Continuum and
    V-Series systems declines more quickly than anticipated, or if
    such declines in revenue are not offset by increases in revenue
    in other areas, our ability to make payments on the Units may be
    impaired.
    
    market acceptance of our ftServer systems;
    consumer perception of our technology and our company generally;
    the emergence of newer and more competitive high-availability
    server products; and
    the accelerated decline of our legacy server sales. 6




---



##### Table of Contents



If our
    ftServer products do not continue to gain market share, we may
    not be able to sustain or expand our business and our revenue
    and operating profits may be adversely affected.
      
    the marketplace for products such as Avance may evolve much more
    slowly than we anticipate or may be substantially smaller than
    is necessary for us to continue to invest in the development and
    deployment of the Avance product;
    the addressable market may be limited by its reliance on
    Xenservertm

    owned by Citrix;
    the price point requires high sales volume to have a meaningful
    impact;
    since the sales model for this product is through indirect
    channels, these channels may take significant time to develop
    and produce meaningful volume;
    there is significant and increasing competition in the
    high-availability marketplace; and
    continued product advancements and development will be needed to
    keep the product competitive.    If we
    are unable to enter into new maintenance service agreements or
    if maintenance service contracts with our customers are not
    renewed at historical rates, our maintenance service revenue may
    become less stable and predictable and our ability to make
    payments on the Notes may be impaired.
   7




---



##### Table of Contents




    market acceptance of our ftServer systems;
    the continued renewal of existing service contracts;
    the continued migration of legacy customers to ftServer;
    reduction of the number of servers in the installed base;
    the acceptance of our service offerings by purchasers of our new
    ftServer and legacy V-Series products;
    consumer perception of our service offerings;
    the potential increasing proportion of sales through indirect
    channels;
    the emergence of newer and more competitive high-availability
    server products; and
    the potential migration to competitor systems.    The
    products that we are and will be developing rely on the
    availability of certain third-party technology and the continued
    ability of our technology partners to meet the technical
    requirements of our products.
    The
    high-availability server market is intensely competitive and
    changes in the market are expected to increase competition and
    change the competitive landscape. This competition and these
    changes may adversely affect our revenue and operating
    profit.
   8




---



##### Table of Contents



Economic
    factors may result in greater variability in our revenue and
    operating profit than in the past, increasing our risk of not
    achieving our targets.
    The
    markets for our products are characterized by rapidly changing
    technologies, and we may not be able to effectively predict or
    react to rapid technological changes that could render our
    products and services obsolete.
    If
    third parties claim that we infringe upon their intellectual
    property rights, our operating profits could be adversely
    affected.
    
    be expensive and time-consuming to defend;
    cause us to cease making, licensing or using products that
    incorporate the challenged intellectual property;
    require us to redesign, reengineer, or rebrand our products or
    packaging, if feasible;
    divert managements attention and resources; or
    require us to enter into royalty or licensing agreements in
    order to obtain the right to use a third partys
    intellectual property.   9




---



##### Table of Contents



If our
    products infringe on the intellectual property rights of others,
    we may be required to make payments to our customers under our
    indemnification obligations for any damages they
    suffer.
    Our
    intellectual property rights may not be adequate to protect our
    business.
      If we
    fail to manage the prices and costs of our products and service,
    our revenue and operating profit could be negatively
    affected.
    If we
    fail to efficiently manage our manufacturing and logistics
    operations, or fail to ensure that our products meet our quality
    standards, our revenue and operating profit could be adversely
    affected.
   10




---



##### Table of Contents



If we
    are unable to recruit, retain and develop appropriately skilled
    employees, we may not be able to implement our strategies and,
    consequently, our results of operations may
    suffer.
    We may
    be liable for systems and service failures.
    
    lose revenue due to adverse customer reaction;
    be required to provide additional services to a customer at no
    charge;
    receive negative publicity, which could damage our reputation
    and adversely affect our ability to attract or retain
    customers; or
    suffer claims for substantial damages against us.     11




---



##### Table of Contents



Many
    of our contracts with customers and strategic partners are
    terminable with limited or no notice. Terminations of these
    contracts could have an adverse effect on our
    business.
    We
    collaborate with other companies to develop a number of new
    products. If any of these other companies were to fail to
    perform, we may not be able to bring those products to market
    successfully or on a timely basis.
    Our
    products may contain undetected defects which could impair their
    market acceptance.
    Our
    revenue, cost of revenue and operating expenses are affected by
    fluctuations in the currency rates of exchange, particularly
    between the U.S. dollar, on the one hand, and the euro, the
    Japanese yen and the British pound sterling, on the other hand,
    as well as certain other currencies.
   12




---



##### Table of Contents



We are
    subject to risks related to our international
    operations.
    
    import and export license requirements;
    trade restrictions;
    changes in regulatory standards;
    labor issues in connection with foreign labor laws or practices;
    changes in tariffs and taxes;
    restrictions on repatriating foreign profits back to the United
    States;
    unfamiliarity with foreign laws and regulations; or
    difficulties in staffing and managing international operations.      The
    current risks of terrorist activity and acts of war may result
    in greater variability in our revenue and operating profit than
    in the past, increasing the risk that we fail to achieve our
    targets.
    Our
    business operations could be significantly harmed by natural
    disasters or global epidemics.
       13




---



##### Table of Contents



Our
    insurance may not cover all losses, including losses resulting
    from business disruption, product liability claims, war,
    terrorist acts and radiation coverage.
    We are
    subject to the Foreign Corrupt Practices Act (the
    FCPA) and a determination that we violated this act
    may affect our business and operations adversely.
    If we
    fail to maintain effective internal control over financial
    reporting, we may not be able to prepare accurate financial
    statements or prevent fraud, which could have a material adverse
    effect on our operations, investor confidence in our business
    and the trading prices of the Units.
    out-of-period
      We are
    subject to the risk of increased income taxes and changes in
    existing tax rules.
   14




---



##### Table of Contents



Certain
    provisions of the Subscription and Shareholders Agreement that
    we entered into with the lenders under the Second Lien Credit
    Facility and with the original purchasers of the Units in
    connection with the April 2010 Refinancing may give rise to
    termination rights, participation rights, put rights or change
    of control or other contractual rights in favor of third
    parties.
        Technology
    Holdings Ltd., the majority equity stakeholder of Holdings, is
    owned by certain private equity sponsors, and the lenders under
    the Second Lien Credit Facility and holders of equity issued to
    the original purchasers of the Units maintain significant
    minority equity stakes in Holdings. The interests of such equity
    holders could be in conflict with the interests of holders of
    the Units.
   15




---



##### Table of Contents



Risks
    Related to the Units and the Notes
  We are
    highly leveraged and may be unable to service or refinance our
    debt.
      
    our ability to obtain additional financing for working capital,
    capital expenditures, product development efforts, strategic
    acquisitions, general corporate purposes or other purposes may
    be impaired in the future;
    we may not be able to refinance our existing indebtedness on
    terms that are favorable to us or at all;
    a substantial portion of our cash flows from operations must be
    dedicated to the payment of principal and interest on our
    indebtedness, decreasing the amount of cash available for other
    purposes;
    we are substantially more leveraged and have significantly less
    financial resources than certain of our competitors, which could
    place us at a competitive disadvantage;
    we may be hindered in our ability to adjust to rapidly changing
    market conditions;
    our high degree of leverage could make us more vulnerable in the
    event of a downturn in general economic conditions or our
    business or in the event of adverse changes in the regulatory
    environment or other adverse circumstances applicable to us;
    our level of indebtedness may prevent us from raising the funds
    necessary to repurchase all of the Notes tendered to us upon the
    occurrence of a change of control; and
    our failure to comply with the restrictive covenants contained
    in the instruments governing our indebtedness, which, among
    other things, may require us to maintain certain financial
    ratios and limit our ability to incur debt and sell assets,
    could result in an event of default that, if not cured or
    waived, could have a material adverse effect on our business or
    our prospects and create substantial doubt about our ability to
    continue as a going concern.  Our
    ability to service or refinance our debt and to operate our
    business will require a significant amount of cash and our
    ability to generate such amounts depends on many factors beyond
    our control.
    
    current economic and competitive conditions in our segments of
    the computer server industry; 16




---



##### Table of Contents




    insolvency of one of our primary suppliers;
    operating difficulties, operating costs or pricing pressures we
    may experience;
    passage of legislation or other regulatory developments that
    affect us adversely; and
    delays in implementing any strategic projects we may have.      Despite
    current indebtedness levels, we and our subsidiaries may still
    be able to incur substantially more debt. This could further
    exacerbate the risks associated with our substantial
    leverage.
    The
    agreements and instruments governing our debt contain
    restrictions and limitations that could significantly impact the
    holders of the Notes and our ability to operate our
    business.
    
    incur additional indebtedness or issue disqualified capital
    stock;
    pay dividends, redeem certain debt or make other restricted
    payments;
    make certain investments or acquisitions;
    grant or permit certain liens on our assets;
    enter into certain transactions with affiliates; 17




---



##### Table of Contents




    merge, amalgamate, consolidate or transfer substantially all of
    our assets;
    incur dividend or other payment restrictions affecting certain
    of our subsidiaries;
    enter into sale and leaseback transactions;
    transfer, sell or acquire assets, including capital stock of our
    subsidiaries;
    change the business we conduct; and
    make capital expenditures.    If we
    default under the Revolving Credit Facility or the Second Lien
    Credit Facility, we may not have the ability to make payments on
    the Notes.
    The
    Issuers may not have access to the cash flow and other assets of
    their subsidiaries and, in the case of the U.S. Issuer, its
    sister companies that may be needed to make payment on the
    Notes.
   18




---



##### Table of Contents



A
    substantial portion of our assets are owned, and a substantial
    portion of our revenue is generated, by guarantors of the Notes
    organized outside the United States. Foreign laws applicable to
    such guarantors might not be as favorable to you as analogous
    United States federal and state laws.
          Your
    right to receive payments on the Notes could be adversely
    affected if any of the non-guarantor affiliates declare
    bankruptcy, liquidate or reorganize.
   19




---



##### Table of Contents



Bankruptcy
    laws and other factors may delay or otherwise impede the ability
    of the trustee to foreclose on the collateral.
        
    whether any payments under the Notes would be made;
    whether or when the trustee could foreclose upon or sell the
    collateral;
    whether the terms or other conditions of the Notes or any rights
    of the holders could be altered in a bankruptcy case without the
    trustees or your consent;
    whether the trustee or you would be able to enforce your rights
    against the guarantors under their guarantees; or
    whether or to what extent holders of the Notes would be
    compensated for any delay in payment or decline in the
    collaterals value.   20




---



##### Table of Contents



Your
    right to exercise remedies with respect to the collateral is
    limited by an intercreditor agreement among the trustee, the
    lender under the Revolving Credit Facility and the lenders under
    the Second Lien Credit Facility.
    It may
    be difficult to realize the value of the collateral securing the
    Notes.
    There
    are circumstances other than repayment or discharge of the Notes
    under which the collateral securing the Notes will be released
    automatically, without your consent or the consent of the
    trustee.
    
    to enable the sale, transfer or other disposal of such
    collateral in a transaction not prohibited under the indenture
    governing the Notes; and
    with respect to collateral held by a guarantor of the Notes,
    upon the release of such guarantor from its guarantee.     21




---



##### Table of Contents



Fraudulent
    conveyance laws could void our obligations under the Notes and
    our obligations and those of Holdings and certain of our other
    affiliates under their guarantees of the Notes.
    debtor-in-possession
  
    was insolvent;
    was rendered insolvent by the issuance of the Outstanding
    U.S. Notes;
    was engaged in a business or transaction for which its remaining
    assets constituted unreasonably small capital; or
    intended to incur, or believed that it would incur, debts beyond
    its ability to repay those debts as they matured.       22




---



##### Table of Contents



Any
    future pledge of collateral might be avoidable in
    bankruptcy.
  debtor-in-possession)
  The
    guarantees of the Notes are subject to limitations that could
    affect your right to receive payments on the
    Notes.
      Since
    certain guarantors of the Notes underlying the Units are
    organized under the laws of Bermuda, Ireland and Cyprus, it may
    be difficult for you to effect service on such Guarantors or
    realize in the U.S. upon judgments you are awarded against such
    guarantors from U.S. courts.
    We may
    not be able to satisfy our repurchase obligations to holders of
    the Notes upon a change of control, from certain asset sales or
    from excess cash flow.
     23




---



##### Table of Contents



The
    market price for the Units or the Notes may be
    volatile.
    
    our operating performance and financial condition;
    the interest of securities dealers in making a market for
    them; and
    the market for similar securities.    You
    should consider the U.S. federal income tax consequences of
    owning the Notes.
    Changes
    in respect of the debt ratings of the Notes may materially and
    adversely affect the availability, cost and terms and conditions
    of our debt.
    ITEM 4.
    INFORMATION
    ON THE COMPANY  A.
    History
    and Development of the Company     24




---



##### Table of Contents



B.
    Business
    Overview  Our
    Company
    i.e.,
  i.e.,
 25




---



##### Table of Contents



Our
    Industry Overview
  2008-2009 year-over-year,
       26




---



##### Table of Contents



Revenue
    Loss, Productivity Loss, and Downtime Hours per Year by
    Industry
  Productivity

Revenue

DowntimeLoss/Hour

Loss/Hour

Hours(Dollars in thousands)Financial

$
3.64


$
9,997.50



3.57Retail

$
2.58


$
397.50



7.75Healthcare

$
1.25


$
157.20



21.70Manufacturing

$
3.06


$
59.93



8.01Public Sector

$
0.85


$
0.00



9.41       and/or
  sub-optimal
     27




---



##### Table of Contents



Our
    Competitive Strengths
  Market Leader with Differentiated, High-Value
    Solutions.
  Diversified, Highly Stable Global Customer
    Base.
  Comprehensive and Stable Recurring Services
    Offerings. day-to-day,
  High Gross Margin Business Model with Significant Operating
    Leverage.
 28




---



##### Table of Contents



Patented Technology.
  Highly Experienced Management Team.
  Our
    Business Strategy
    Capitalize on Favorable Market Dynamics by Maintaining a
    Leading Technology Platform.
 29




---



##### Table of Contents



Optimize and Expand Channel Partner Relationships to Drive
    Avance Penetration.
  Maintain High Attach Rates and Retention Levels of Service
    Offerings and Expand Managed Services
    Footprint
  Preserve Our Legacy Customer Base.
  Our
    Solutions Offerings
  and/or
  Stratus
    Hardware
   30




---



##### Table of Contents




    Lockstep Technology.  Lockstep technology uses
    replicated, fault-tolerant hardware components that process the
    same instructions at the same time. In the event of a component
    malfunction, the partner component acts as an active spare that
    continues normal operation and averts system downtime. The
    system also detects and corrects transient hardware errors that
    could cause software failures if left unchecked.
    Failsafe Software.  Proprietary, failsafe
    software works in concert with lockstep technology to prevent
    many software errors from escalating into outages. Unlike
    typical servers or clusters, our server hardware and software
    handles most errors transparently, shielding the operating
    system, middleware, and application software. Another advantage
    of our approach is that it constantly protects and maintains
    in-memory data.
    ActiveService Architecture and Value-Added
    Services.  Our ActiveService capabilities enable
    built-in serviceability, allowing our server systems to
    constantly monitor their own operation. When a fault is
    detected, the server isolates the condition and automatically
    opens a call that tells our support center exactly what action
    to take.      Legacy
    Server Systems
       31




---



##### Table of Contents



ftServer
    System Family
      sub-$10
    Avance
    High Availability Software
  and/or
 32




---



##### Table of Contents




    automatic availability in excess of 99.99% and built-in
    virtualization for standard x86 servers;
    prevention of downtime and data loss with automated 24/7
    monitoring, error detection, isolation and fault-management
    features;
    24/7 access to critical business solutions from a single
    management console;
    support for multiple Windows and Linux virtual machines with
    integrated Avance virtualization;
    reduction of cost and complexity of traditional and virtualized
    IT environments with a solution that is easy to install, use and
    maintain; and
    no need for failover scripting, repeated test procedures or
    extra effort to make applications cluster-aware.    Maintenance
    Services
         33




---



##### Table of Contents



24 hours-a-day, days-a-week
  
    proactive remote monitoring capabilities, including predictive
    analysis, remote system commands and the ability to pinpoint and
    duplicate system level problems;
    automatic notification of any hardware problems;
    24/7
    same-day,
    on-site
    service for critical remedial service;
    immediate access to our on-line database for call history
    information to expedite the resolution of problems; and
    transmission of technical information and documentation from the
    Stratus CAC.      
    24/7 access to availability engineers, software assistance,
    hardware assistance and hardware monitoring;
    problem relief focused on resuming operation, plus problem
    root-cause determination;
    service engineer response to critical problems;
    same-day
    onsite emergency service; and
    premium services with Microsoft.       34




---



##### Table of Contents



Research
    and Development
          Sales
    and Marketing
      and/or
   35




---



##### Table of Contents



Manufacturing
      Competition
        and/or
 36




---



##### Table of Contents



16-20 hours
  Patents,
    Trademarks, Copyrights and Intellectual Property
    Licenses
  and/or
  Employees
      Litigation
    C.
    Organizational
    Structure    
 37




---



##### Table of Contents



Notes to
    Organizational Diagram:
  (a)
    Stratus Technologies Bermuda Holdings Ltd. is the top tier
    holding company. Stratus Technologies Bermuda Holdings Ltd. has
    issued Series A Preference Shares to Technology Holdings
    Ltd., which is not depicted in the above diagram, and Ordinary
    Shares to external investors including Technology Holdings Ltd.
    The shareholders of Technology Holdings Ltd. are certain private
    equity sponsors, namely Investcorp Stratus Limited Partnership
    and Stratus Holdings Limited (which we refer to in this annual
    report as the Investcorp Group), MidOcean Capital
    Partners Europe, L.P. (which we refer to in this annual report
    as MidOcean), and Intel Atlantic, Inc. (which we
    refer to in this annual report as Intel Atlantic).
    Additionally, as a result of the April 2010 Refinancing, the
    lenders under the Second Lien Credit Facility were issued in the
    aggregate approximately 25% of the issued share capital of
    Holdings, and the original purchasers of the Units were issued
    in the aggregate approximately 10%, of the issued share capital
    of Holdings. Certain additional share issuances by Holdings to
    the lenders under the Second Lien Credit Facility are
    contemplated in the event that the Issuers do not repay all
    outstanding indebtedness under the Second Lien Credit Facility
    by April 30, 2013 or April 30, 2014. See
    Item 7. Major Shareholders and Related Party
    Transactions  A. Major Shareholders for
    additional information about Holdings stockholders.  (b)
    Stratus Technologies Bermuda Ltd. owns all Stratus product and
    customer service intellectual property, and, as of
    February 28, 2011, licenses this intellectual property
    directly to Stratus Technologies Ireland Limited and unrelated
    third parties. As described more fully in note (c) below,
    prior to February 28, 2011, Stratus Technologies Bermuda
    Ltd. licensed the intellectual property that is currently
    licensed directly to Stratus Technologies Ireland Limited to a
    different wholly owned subsidiary, SRA Technologies Cyprus
    Limited, which would in turn license such intellectual property
    to Stratus Technologies Ireland Limited. Stratus Technologies
    Bermuda Ltd. is 100% owned by Stratus Technologies Bermuda
    Holdings Ltd.  (c)
    SRA Technologies Cyprus Limited currently has no operations, and
    it is anticipated that, in connection with certain contemplated
    internal corporate organizational structure initiatives, the
    business and operations of SRA Technologies Cyprus Limited would
    eventually be unwound and that entity dissolved. Prior to
    February 28, 2011, SRA Technologies Cyprus Limited licensed
    product and customer service intellectual property from Stratus
    Technologies Bermuda Ltd. and then
    sub-licensed
    the intellectual property to Stratus Technologies Ireland
    Limited. In connection with these contemplated internal
    corporate organizational structure initiatives, effective
    February 28, 2011 (the first day of fiscal 2012), these
    intellectual property licensing arrangements were terminated. As
    a result of the termination of these arrangements, Stratus
    Technologies Ireland Limited now licenses this intellectual
    property directly from Stratus Technologies Bermuda Ltd. SRA
    Technologies Cyprus Limited is 100% owned by Stratus
    Technologies Bermuda Ltd.  (d)
    Stratus Technologies, Inc. sells the Stratus products it
    purchases from Stratus Technologies Ireland Limited to customers
    in the U.S. Stratus Technologies, Inc. also provides
    marketing and administrative support to affiliates, provides
    customer service support on behalf of Stratus Technologies
    Ireland Limited and performs research and development on behalf
    of Stratus Technologies Bermuda Ltd. Stratus Technologies, Inc.
    is 100% owned by Stratus Technologies Bermuda Ltd.  (e)
    Stratus Technologies Ireland Limited sells Stratus customer
    service contracts directly to third parties and sells Stratus
    products to affiliates and third party distributors. Stratus
    Technologies Ireland Limited previously paid royalties to SRA
    Technologies Cyprus Limited for the use of Stratus customer
    service and product intellectual property. As a result of the
    termination of the intellectual property licensing arrangements
    with SRA Technologies Cyprus Limited, effective
    February 28, 2011, described more fully in note
    (c) above, Stratus Technologies Ireland Limited now pays
    royalties directly to Stratus Technologies Bermuda Ltd. for use
    of this intellectual property. Stratus Technologies Ireland
    Limited is 100% owned by Stratus Technologies Bermuda Ltd.  (f)
    AVANCE Technologies Ltd. is a non-operating entity with no
    assets or liabilities. AVANCE Technologies Ltd. is 100% owned by
    Stratus Technologies Bermuda Ltd.  (g)
    Cemprus Technologies, Inc. owns the membership interests in
    Cemprus, LLC, which holds strategic licenses for our
    telecommunications business. Cemprus Technologies, Inc. is 100%
    owned by Stratus Technologies, Inc. and is the sole member of
    Cemprus, LLC. 38




---



##### Table of Contents



D.
    Property
    and Equipment  Property
    Square

LeaseCompany

Location

Use

Feet

ExpirationStratus Technologies, Inc.

Maynard, MA

Corporate and R&D


287,037



05/31/16Stratus Technologies, Inc.

Phoenix, AZ

Service


20,660



12/21/16   ITEM 5.
    OPERATING
    AND FINANCIAL REVIEW AND PROSPECTS  A.
    Operating
    Results    Overview
   39




---



##### Table of Contents




    Product revenueconsists primarily of revenue generated
    from sales of our servers, which include our proprietary and
    other operating systems. We have experienced a decline in
    revenue from sales of legacy systems over the years due to a
    number of factors, including weakness in information technology
    spending, the emergence of newer and more competitive
    high-availability server products, the proprietary nature of the
    operating systems running on the legacy systems and a shift in
    our business focus to sales of ftServer and Avance systems. We
    expect our future product revenue growth largely to derive from
    sales of ftServer systems and our Avance software. We also
    intend to leverage our current installed base through add-on
    sales and upgrades.
    Service revenueconsists of revenue primarily generated
    from our customer support activities, which consist of
    maintenance contracts for which revenue typically is recognized
    ratably over the contractual period, services such as part
    repair, time and materials activities, installation, education,
    managed services and professional consulting services. In the
    twelve-months ended February 27, 2011, over 99% of legacy
    server sales and 83% of ftServer system sales included service
    contracts. Our systems tend to remain under service and in
    operation for long periods of time, historically resulting in a
    relatively predictable service revenue stream.  Fiscal Years EndedFebruary 27,


February 28,


February 22,2011


2010


2009(Dollars in thousands)Legacy products

$
21,821


$
24,813


$
29,019ftServer products


48,137



41,738



63,324Avance product


1,146



163



19Total product revenue


71,104



66,714



92,362Customer service revenue


111,728



116,816



127,481Solution services revenue


23,363



20,883



23,181Total service revenue


135,091



137,699



150,662Total revenue

$
206,195


$
204,413


$
243,024    40




---



##### Table of Contents



Revenue
    by Region
  Fiscal Years EndedFebruary 27,





February 28,





February 22,2011


% of Rev


2010


% of Rev


2009


% of Rev(Dollars in thousands)U.S.

$
83,790



40.6
%

$
86,840



42.5
%

$
97,730



40.2
%EMEA


45,808



22.2



45,389



22.2



62,890



25.9Japan


48,857



23.7



46,887



22.9



53,033



21.8Asia-Pacific


23,993



11.6



22,958



11.2



27,609



11.4Other


3,747



1.9



2,339



1.2



1,762



0.7Total revenue

$
206,195



100.0
%

$
204,413



100.0
%

$
243,024



100.0
%       April
    2010 Refinancing
    Second
    Lien Credit Agreement
  paid-in-kind paid-in-kind
   41




---



##### Table of Contents



Senior
    Secured Notes and Equity
       42




---



##### Table of Contents




    the Issuers right to redeem the Senior Secured Notes at a
    specified price in the event of an Equity Offering;
    the right of the holder of the Senior Secured Notes to sell back
    the Senior Secured Notes to the Company at a specified price in
    the event of a Change in Control;
    the Issuers requirement to make an offer to purchase the
    Senior Secured Notes with 100% of Excess Cash Flow for each
    annual period ending on the last day of each fiscal year ending
    on or after February 27, 2011 at 120% of the principal
    amount together with accrued and unpaid interest.      Second
    Lien Notes and Senior Secured Notes
    Allocated Amount(In thousands)Senior Secured Notes


184,458Second Lien Notes


58,629Series B preference shares


11,451Series B ordinary shares


5,603Right to shares of Series B preference shares


5,518Right to shares of Series B ordinary shares


1,533      43




---



##### Table of Contents



Revolving
    Credit Facility
      Capitalized
    Registration Fees
    Restructuring
    Programs
           44




---



##### Table of Contents



Recent
    Sale of Subsidiary
        Non-Cash
    Stock-Based Compensation
         45




---



##### Table of Contents



Critical
    Accounting Policies
    Fair
    Value of April 2010 Refinancing
    
    A second lien loan (Lien 2), issued pursuant to the
    Second Lien Credit Agreement
    Senior secured notes (the Notes)
    Our right to redeem the debt at a specified price in the event
    of a future equity offering, the right of our creditors to sell
    back the debt to us at a specified price in the event of a
    change in control, and our requirement to make an offer to
    redeem a portion of the debt using a formula based on certain
    cash-flow metrics on the last day of each fiscal year ending on
    or after February 27, 2011 (collectively referred to as the
    Embedded Derivatives).
    Preferred stock and ordinary stock (the Preferred and
    Ordinary Shares)
    The Lien 2 holders contingent right to additional
    preferred and ordinary stock should we not repay Lien 2 in full
    by either April 30, 2013 or April 30, 2014 (the
    Contingent Equity). 46




---



##### Table of Contents



47




---



##### Table of Contents



Revenue
    recognition
        and/or
       48




---



##### Table of Contents



Inventory
    Valuation
  (first-in,
  Goodwill
    and intangible assets
    Long-lived
    assets
    Warranty
   49




---



##### Table of Contents



Results
    of Operations
    February 27,


February 28,


February 22,2011


2010


2009(Dollars in thousands)RevenueProduct

$
71,104


$
66,714


$
92,362Service


135,091



137,699



150,662Total revenue


206,195



204,413



243,024Product


32,892



30,011



46,939Service


58,359



61,566



67,538Total cost of revenue


91,251



91,577



114,477Gross profit


114,944



112,836



128,547Research and development


27,469



30,280



33,837Sales and marketing


29,643



28,867



36,126General and administrative


19,847



19,193



25,362Amortization of intangibles


52



1,975



2,227Restructuring


1,694



1,484



8,652(Gain) loss on sale of subsidiary


(3,655
)


(818
)


107Management fees


1,117



700



700Total operating expenses


76,167



81,681



107,011Profit from operations


38,777



31,155



21,536Interest income


80



461



235Interest expense


(43,728
)


(25,307
)


(32,820
)Loss on extinguishment of debt


(3,751
)






Other (expense) income, net


(1,751
)


1,920



918(Loss) income before income taxes


(10,373
)


8,229



(10,131
)Provision for income taxes


1,520



1,584



2,132Net (loss) income

$
(11,893
)

$
6,645


$
(12,263
)   50




---



##### Table of Contents



February 27,


February 28,


February 22,2011


2010


2009RevenueProduct


34.5
%


32.6
%


38.0
%Service


65.5



67.4



62.0Total revenue


100.0



100.0



100.0Product


16.0



14.7



19.3Service


28.3



30.1



27.8Total Cost of Revenue


44.3



44.8



47.1Gross profit


55.7



55.2



52.9Research and development


13.3



14.8



13.9Sales and marketing


14.4



14.1



14.9General and administrative


9.6



9.4



10.4Amortization of intangibles


0.0



1.0



0.9Restructuring


0.8



0.7



3.6(Gain) loss on sale of subsidiary


(1.8
)


(0.4
)


0.0Management fees


0.5



0.3



0.3Total operating expenses


36.9



40.0



44.0Profit from operations


18.8



15.2



8.9Interest income


0.0



0.2



0.1Interest expense


(21.2
)


(12.2
)


(13.5
)Loss on extinguishment of debt


(1.8
)






Other (expense) income, net


(0.8
)


0.9



0.4(Loss) income before income taxes


(5.0
)


4.1



(4.1
)Provision for income taxes


0.7



0.8



0.9Net (loss) income


(5.8
)%


3.3
%


(5.0
)%  51




---



##### Table of Contents



Non-GAAP Financial
    Measures
  Fiscal Period EndedFebruary 27,


February 28,


February 22,2011


2010


2009(Dollars in thousands)Net (loss) income

$
(11,893
)

$
6,645


$
(12,263
)Add:Interest expense, net


43,648



24,846



32,585Provision for income taxes


1,520



1,584



2,132Depreciation and amortization


9,147



12,580



16,559EBITDA(1)

$
42,422


$
45,655


$
39,013Add (deduct)Restructuring(a)


1,694



1,484



8,652Stock-based compensation(b)


468



3,975



387Management fees(c)


1,117



700



700(Gain) loss on sale of subsidiary(d)


(3,655
)


(818
)


107Reserves(e)


959



1,715



3,614Loss on extinguishment of debt(f)


3,751







Other expense, net(g)


2,407



244



180Telco non-recurring(h)










2,027Adjusted EBITDA(1)

$
49,163


$
52,955


$
54,680     1)
    
    EBITDA represents income (loss) before interest, taxes,
    depreciation and amortization. We present EBITDA because we
    consider it an important supplemental measure of our performance
    and believe it is frequently used by securities analysts,
    investors and other interested parties in the evaluation of
    companies in our industry. In addition to other applications,
    EBITDA is used by us and others in our industry to evaluate and
    price potential acquisition candidates.        
    EBITDA and Adjusted EBITDA do not reflect our cash expenditures,
    or future requirements for capital expenditures, or contractual
    commitments;
    EBITDA and Adjusted EBITDA do not reflect changes in, or cash
    requirements for, our working capital needs;
    EBITDA and Adjusted EBITDA do not reflect the significant
    interest expense, or the cash requirements necessary to service
    interest or principal payments, on our debts; 52




---



##### Table of Contents




    Although depreciation and amortization are non-cash charges, the
    assets being depreciated and amortized will often have to be
    replaced in the future, and EBITDA and Adjusted EBITDA do not
    reflect any cash requirements for such replacements;
    EBITDA and Adjusted EBITDA do not reflect the impact of earnings
    or charges resulting from matters we consider not to be
    indicative of our ongoing operations; and
    Other companies in our industry may calculate EBITDA and
    Adjusted EBITDA differently than we do, limiting its usefulness
    as a comparative measure.    (a)
    In order to better align expenses with anticipated revenues, we
    implemented restructuring programs in fiscal 2011, 2010 and
    2009. These programs were designed to streamline our business
    model and centralize certain functions.          (b)
    In fiscal 2011, we recorded non-cash stock-based compensation
    expense charges of $0.5 million relating to share-based
    payments to employees.      (c)
    On April 30, 2010 we entered into a four year advisory and
    strategic planning agreement with an investment banking firm.
    The yearly fee is $0.5 million.      (d)
    As a result of the sale of our proprietary Emergent Networks
    Solutions Voice over Internet Protocol (VOIP)
    Software business and certain net assets related to our
    telecommunications business (collectively, the Emergent
    Business) in January 2009, we recorded a gain on the sale
    in fiscal 2011 and fiscal 2010 of $3.7 million and
    $0.8 million, respectively, and a loss on the sale in
    fiscal 2009 of $0.1 million. See Note 15 of our
    audited consolidated financial statements under
    Item 18. Financial Statements. 53




---



##### Table of Contents



(e)
    In fiscal 2011 and fiscal 2010, we incurred $1.0 million
    and $1.7 million of non-cash inventory write downs,
    respectively.    (f)
    In fiscal 2011 we recorded $3.8 million on extinguishment
    of debt for the First Lien Credit Facility and the Second Lien
    Credit Facility due to the write off of deferred financing fees
    and debt discount as a result of the April 2010 Refinancing.  (g)
    In fiscal 2011, we recorded other expense, net of
    $2.4 million, primarily consisting of $0.6 million
    bank fees, $0.9 million of net foreign currency losses and
    $0.6 million of net miscellaneous expenses and
    non-recurring charges. In addition, we recorded a
    $0.3 million loss due to the change in fair value of the
    embedded derivatives related to the Senior Secured Notes. See
    Note 8 to our audited consolidated financial statements
    under Item 18. Financial Statements.      (h)
    In fiscal 2009, we added back $2.0 million relating to our
    net Adjusted EBITDA loss which was attributable to the Emergent
    Business, which was sold in January 2009 (see note d above).  Twelve
    Months Ended February 27, 2011 Compared to Twelve Months
    Ended February 28, 2010
  Revenue
    12 Months Ended


Increase (Decrease)February 27,


February 28,


FY11 vs. FY102011


2010


$


%(Dollars in thousands)Product revenue

$
71,104


$
66,714


$
4,390



6.6
%Service revenue


135,091



137,699



(2,608
)


(1.9
)Total revenue

$
206,195


$
204,413


$
1,782



0.9
%   Product Revenue.
 54




---



##### Table of Contents



12 Months Ended


Increase (Decrease)February 27,


February 28,


FY11 vs. FY102011


2010


$


%(Dollars in thousands)Continuum

$
3,102


$
4,014


$
(912
)


(22.7
)%V-Series


18,719



20,799



(2,080
)


(10.0
)Total Legacy


21,821



24,813



(2,992
)


(12.1
)Windows


34,748



30,049



4,699



15.6Linux


9,651



8,293



1,358



16.4VMware


3,738



3,279



459



14.0Emergent






117



(117
)


(100.0
)Total ft


48,137



41,738



6, 399



15.3Avance


1,146



163



983



603.1Total Product Revenue

$
71,104


$
66,714


$
4,390



6.6
%   Service Revenue.
  Gross
    Profit
        Research
    and Development
   55




---



##### Table of Contents



Sales
    and Marketing
    General
    and Administrative
    Amortization
    of Intangibles
    Restructuring
    Charges
    Gain
    (loss) on Sale of Subsidiary
    Management
    Fees
   56




---



##### Table of Contents



Profit
    from Operations
    Interest
    Expense, Net
          Loss
    on Extinguishment of Debt
    Other
    (Expense) Income, Net
    Income
    Taxes
   57




---



##### Table of Contents



Year
    Ended February 28, 2010 Compared to Year Ended
    February 22, 2009
  Revenue
    Fiscal Years Ended


Increase (Decrease)February 28,


February 22,


FY10 vs. FY092010


2009


$


%(Dollars in thousands)Product revenue

$
66,714


$
92,362


$
(25,648
)


(27.8
)%Service revenue


137,699



150,662



(12,963
)


(8.6
)Total revenue

$
204,413


$
243,024


$
(38,611
)


(15.9
)%     out-of-period
    Product Revenue.
 58




---



##### Table of Contents



Fiscal Years Ended


Increase (Decrease)February 28,


February 22,


FY10 vs. FY092010


2009


$


%(Dollars in thousands)Continuum

$
4,014


$
7,258


$
(3,244
)


(44.7
)%V-Series


20,799



21,761



(962
)


(4.4
)Total Legacy


24,813



29,019



(4,206
)


(14.5
)Windows


30,049



43,407



(13,358
)


(30.8
)Linux


8,293



10,830



(2,537
)


(23.4
)VMware


3,279



2,709



570



21.0Emergent


117



6,378



(6,261
)


(98.2
)Total ft


41,738



63,324



(21,586
)


(34.1
)Avance


163



19



144



757.9Total product revenue

$
66,714


$
92,362


$
(25,648
)


(27.8
)%   Service Revenue.
  Gross
    Profit
       59




---



##### Table of Contents



Research
    and Development
    Sales
    and Marketing
    General
    and Administrative
    Amortization
    of Intangibles
    Restructuring
    Charges
    Gain
    (loss) on Sale of Subsidiary
    Management
    Fees
   60




---



##### Table of Contents



Profit
    from Operations
    Interest
    Expense, Net
    Other
    Income, Net
    Income
    Taxes
    New
    Accounting Guidance
      Capital
    Commitments
   61




---



##### Table of Contents



Quantitative
    and Qualitative Disclosure About Market Risk
    Foreign
    Exchange Risk
        Interest
    Rate Risk
     62




---



##### Table of Contents



B.
    Liquidity
    and Capital Resources             63




---



##### Table of Contents



C.
    Research
    and Development, Patents and Licenses    D.
    Trend
    Information   64




---



##### Table of Contents



E.
    Off-Balance
    Sheet Arrangements        F.
    Tabular
    Disclosure of Contractual Obligations    Fiscal Years Ending


BeyondTotal


2012


2013


2014


2015


2015(Dollars in thousands)Long-term debt(1)(2)

$
338,635


$
5,000


$
5,000


$
5,000


$
5,000


$
318,635Interest obligations(3)


134,067



31,312



30,054



29,931



29,853



12,917Operating lease obligations


25,926



5,629



5,197



4,993



4,380



5,727Purchase obligations


3,900



3,900















Total

$
502,528


$
45,841


$
40,251


$
39,924


$
39,233


$
337,279     (1)
    
    As presented in this table, long-term debt represents the
    aggregate mandatory repayments of principal, but not interest,
    for each period under our Revolving Credit Facility, our Senior
    Secured Notes and our Second Lien Credit Facility, as of
    February 27, 2011. The repayment amount of the Second Lien
    Credit Facility above includes the accretion of interest
    paid-in-kind
    over the life of the loan. See Note 8 of our audited
    consolidated financial statements under Item 18.
    Financial Statements for the year ended February 27,
    2011, for additional information. 65




---



##### Table of Contents



(2)
    
    The foregoing assumes that, within 95 days after the end of
    each fiscal year commencing with fiscal 2011, $5.0 million
    per year will be used by us to make Excess Cash Flow Offers.
    Pursuant to the terms of the indenture governing the Notes, we
    are required, within 95 days after the end of each fiscal
    year commencing with fiscal 2011, to make an offer (an
    Excess Cash Flow Offer) to repurchase outstanding
    Notes at 120% of the principal amount thereof, plus accrued and
    unpaid interest, if any. The amount of each Excess Cash Flow
    Offer must equal the amount of Excess Cash Flow for the previous
    fiscal year (as calculated under the indenture governing the
    Notes), subject to a minimum amount of $5.0 million. The
    presentation of long-term debt obligations above, assumes a
    minimum Excess Cash Flow Offer of $5.0 million per year.
    Depending on the amount of Excess Cash Flow actually available
    to make Excess Cash Flow Offers in each such period, the actual
    amount of such payments could be significantly higher.(3)
    
    Assumes a 12.0% rate on our fixed rate Senior Secured Notes, a
    LIBOR interest rate of 0.31% added to a base rate of 5.0% for
    our Second Lien Credit Facility variable rate obligation and a
    LIBOR floor of 1.50% plus 475 related to our variable rate
    Revolving Credit Facility.        ITEM 6.
    DIRECTORS,
    SENIOR MANAGEMENT AND EMPLOYEES  A.
    Directors
    and Senior Management    Name

Age

TitleDavid C. Laurello


55


Chairman of the Board of Directors; President(1)Robert C. Laufer


52


Director; Vice President and Treasurer(2)Frederick S. Prifty


66


Vice President and Assistant Secretary(3)Stephen B. Baus


46


Director(4)Lars C. Haegg


45


Director(5)Stephen C. Kiely


65


Director(5)Ernest A. Morrison


53


Director(6)Robert Sharp


46


Director(5)   (1)
    
    Mr. Laurello also serves as Chairman of the Board of
    Directors and President and Chief Executive Officer of the U.S.
    Issuer. Mr. Laurello does not hold a director or executive
    officer position with the Bermuda Issuer. 66




---



##### Table of Contents



(2)
    
    Mr. Laufer also serves as a director and Vice President and
    Treasurer of the Bermuda Issuer and as a Director and Senior
    Vice President, Chief Financial Officer and Treasurer of the
    U.S. Issuer.(3)
    
    Mr. Prifty also serves as a director and President of the
    Bermuda Issuer and as Vice President, General Counsel and
    Secretary of the U.S. Issuer.(4)
    
    Mr. Baus also serves as a director of each of the Bermuda
    Issuer and the U.S. Issuer. Mr. Baus is the appointee of
    the lenders under the Second Lien Credit Facility holding a
    majority in interest of the loans outstanding under the Second
    Lien Credit Facility, pursuant to Subscription and Shareholders
    Agreement entered into on April 8, 2010.(5)
    
    Mr. Haegg, Mr. Sharp and Mr. Kiely also each
    serve as directors of each of the Bermuda Issuer and the U.S.
    Issuer. Mr. Haegg and Mr. Sharp are the appointees of
    Technology Holdings Ltd., pursuant to Subscription and
    Shareholders Agreement entered into on April 8, 2010.(6)
    
    Mr. Morrison also serves as a director of the Bermuda
    Issuer. Mr. Morrison does not hold a director or executive
    officer position with the U.S. Issuer.  David C. Laurello
  Robert C. Laufer
  Frederick S. Prifty
  Stephen B. Baus 2002-2004.
  Lars C. Haegg
 67




---



##### Table of Contents



Stephen C. Kiely
  Ernest Morrison
  Robert Sharp
  B.
    Compensation    Bonus
    Plans
    C.
    Board
    Practices   68




---



##### Table of Contents



Audit
    Committee
    Compensation
    Committee
    D.
    Employees    2011


2010


2009Americas (including Mexico and Canada)


418



441



446Europe and South Africa


59



65



66Japan


48



49



45Asia/Pacific


43



41



36TOTAL


568



596



593   2011


2010


2009Sales


79



92



83Marketing


31



19



18Engineering


141



144



157Customer Service


215



232



222Supply Chain Management


13



14



16Finance and Administration


89



95



97TOTAL


568



596



593    69




---



##### Table of Contents



E.
    Share
    Ownership            Employee
    Stock Option Plan
   70




---



##### Table of Contents



ITEM 7.
    MAJOR
    SHAREHOLDERS AND RELATED PARTY TRANSACTIONS  A.
    Major
    Shareholders    Holdings Ordinary

Holdings PreferenceShares(a)

Shares(b)Number of

Percent of

Number of

Percent ofName

Shares

Class

Shares

ClassTechnology Holdings Ltd.(c)


37,679,352.00



56.9
%


6,561,242.00



65.0
%Northwestern Mutual Life Insurance Co.(d)


3,559,743.91



5.4
%


542,564.24



5.4
%     (a)
    Includes 10,093,146.62 preference shares that are convertible
    into ordinary shares at any time at the option of the holder.  (b)
    Preference shares vote and are convertible into ordinary shares
    on a 2.17:1 basis.  (c)
    A majority of our outstanding share capital is owned of record
    by Technology Holdings Ltd., which is a Bermuda exempted
    company. The shareholders of Technology Holdings Ltd. are in
    turn the Investcorp Group, MidOcean and Intel Atlantic.   71




---



##### Table of Contents



c/o Paget-Brown
  c/o Maples
    (d)
    The Northwestern Mutual Life Insurance Company is a Second Lien
    Lender. The address for the Northwestern Mutual Life Insurance
    Company is 720 East Wisconsin Avenue, Milwaukee, Wisconsin,
    53202.  Holdings
    by U.S. Shareholders
    Subscription
    and Shareholders Agreement
     72




---



##### Table of Contents



B.
    Related
    Party Transactions  Management
    Advisory Agreements
  out-of-pocket
  Management
    Shareholders Agreements and Management Put Options
      Non-Management
    Shareholders Agreements
   73




---



##### Table of Contents



Shareholders
    Agreement
      Co-Sale Rights:
  Registration Rights:
  Election of Directors:
  C.
    Interests
    of Experts and Counsel    ITEM 8.
    FINANCIAL
    INFORMATION  A.
    Consolidated
    Statements and Other Financial Information    B.
    Significant
    Changes    ITEM 9.
    THE
    OFFER AND LISTING  A.
    Listing
    Details   74




---



##### Table of Contents



B.
    Plan of
    Distribution    C.
    Markets    D.
    Selling
    Shareholders    E.
    Dilution    F.
    Expenses
    of the Issue    ITEM 10.
    ADDITIONAL
    INFORMATION  A.
    Share
    Capital    B.
    Memorandum
    and Bye-Laws and Equity Holders Rights  Form F-4 No. 333-171863)
  C.
    Material
    Contracts    Agreements
    Relating to the Units and Underlying Notes
    Revolving
    Credit Facility
   75




---



##### Table of Contents



Second
    Lien Credit Facility
    Intercreditor
    Agreement
    Agreements
    with Shareholders
    NEC
    Agreements
       76




---



##### Table of Contents



Management
    Agreements
    D.
    Exchange
    Controls    E.
    Taxation    Bermuda
    Taxation Considerations
    United
    States Federal Income Tax Considerations
    Tax on
    the Exercise of Stock Options
   77




---



##### Table of Contents



F.
    Dividends
    and Paying Agents    G.
    Statement
    by Experts    H.
    Documents
    on Display  Form F-4
  1-800-SEC-0330.
    I.
    Subsidiary
    Information    ITEM 11.
    QUANTITATIVE
    AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK    ITEM 12.
    DESCRIPTION
    OF SECURITIES OTHER THAN EQUITY SECURITIES   PART II  ITEM 13.
    DEFAULTS,
    DIVIDEND ARREARAGES AND DELINQUENCIES    ITEM 14.
    MATERIAL
    MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF
    PROCEEDS   78




---



##### Table of Contents



ITEM 15.
    CONTROLS
    AND PROCEDURES  Rule 15d-15
      ITEM 16A.
    AUDIT
    COMMITTEE FINANCIAL EXPERTS    ITEM 16B.
    CODE
    OF ETHICS    ITEM 16C.
    PRINCIPAL
    ACCOUNTANT FEES AND SERVICES    2011


2010$ in 000sAudit Fees

$
1,789


$
944Audit Related Fees






Tax Fees






Other Services Fees


4



Total

$
1,793


$
944  79




---



##### Table of Contents



Audit Fees.
  Audit Related Fees.
  Tax Fees.
  Other Services Fees.
    ITEM 16D.
    EXEMPTIONS
    FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES    ITEM 16E.
    PURCHASES
    OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED
    PURCHASERS    ITEM 16F.
    CHANGE
    IN REGISTRANTS CERTIFYING ACCOUNTANT    ITEM 16G.
    CORPORATE
    GOVERNANCE   80




---



##### Table of Contents



PART III  ITEM 17.
    FINANCIAL
    STATEMENTS    ITEM 18.
    FINANCIAL
    STATEMENTS    ITEM 19.
    EXHIBITS  ExhibitNumber

Description1.1#


Certificate of Incorporation of Stratus Technologies Bermuda
    Holdings Ltd.1.2#


Memorandum of Association of Stratus Technologies Bermuda
    Holdings Ltd.1.3#


Bye-laws of Stratus Technologies Bermuda Holdings Ltd.2.1#


Indenture, dated as of April 8, 2010, among Stratus
    Technologies Bermuda Ltd., Stratus Technologies, Inc., the
    guarantors party thereto and The Bank of New York Mellon
    Trust Company, N.A., as trustee and collateral agent.2.2#


Form of Unit and Notes, issued pursuant to Indenture, dated as
    of April 8, 2010, among Stratus Technologies Bermuda Ltd.,
    Stratus Technologies, Inc., the guarantors party thereto and The
    Bank of New York Mellon Trust Company, N.A., as trustee and
    collateral agent (contained in Exhibit 2.1).2.3#


Note Guarantee, dated as of April 8, 2010, executed by
    Stratus Technologies Bermuda Ltd., Stratus Technologies, Inc.,
    Stratus Technologies Bermuda Holdings Ltd., SRA Technologies
    Cyprus Limited, Stratus Technologies Ireland Limited, Cemprus
    Technologies, Inc., Cemprus, LLC, and the other guarantors party
    thereto from time to time in favor of The Bank of New York
    Mellon Trust Company, N.A., as trustee.2.4#


Indenture Collateral Agreement, dated as of April 8, 2010,
    executed by Stratus Technologies Bermuda Holdings Ltd., Stratus
    Technologies Bermuda Ltd., Stratus Technologies, Inc. SRA
    Technologies Cyprus Limited, Stratus Technologies Ireland
    Limited, Cemprus Technologies, Inc., Cemprus, LLC and the other
    grantors party thereto from time to time in favor of The Bank of
    New York Mellon Trust Company, N.A., as collateral agent.2.5#


Amended and Restated Intercreditor Agreement, dated as of
    April 8, 2010, among Stratus Technologies, Inc., Stratus
    Technologies Bermuda Ltd., Jefferies Finance LLC, as
    administrative agent, The Bank of New York Mellon
    Trust Company, N.A., as collateral agent and trustee, and
    Wilmington Trust FSB (as successor to Deutsche Bank
    Trust Company Americas), as administrative agent.4.1#


Revolving Credit Agreement, dated as of April 8, 2010,
    among Stratus Technologies Bermuda Holdings Ltd., Stratus
    Technologies Bermuda Ltd., Stratus Technologies, Inc., Jefferies
    Finance LLC, as administrative agent, and the other lenders and
    agents party thereto.4.2#


First Amended and Restated Second Lien Credit Agreement, dated
    as of August 28, 2006, among Stratus Technologies, Inc.,
    Stratus Technologies Bermuda Ltd., Wilmington Trust FSB (as
    successor to Deutsche Bank Trust Company Americas), as
    administrative agent, and the other lenders and agents party
    thereto.4.3#


First Amendment to First Amended and Restated Second Lien Credit
    Agreement, dated as of June 5, 2007, among Stratus
    Technologies, Inc., Stratus Technologies Bermuda Ltd.,
    Wilmington Trust FSB (as successor to Deutsche Bank
    Trust Company Americas), as administrative agent, and the
    other lenders and agents party thereto.4.4#


Second Amendment to First Amended and Restated Second Lien
    Credit Agreement, dated as of March 22, 2010, among Stratus
    Technologies, Inc., Stratus Technologies Bermuda Ltd.,
    Wilmington Trust FSB (as successor to Deutsche Bank
    Trust Company Americas), as administrative agent, and the
    other lenders and agents party thereto.4.5#


Subscription and Shareholders Agreement, dated as of
    April 8, 2010, among Stratus Technologies Bermuda Holdings
    Ltd., Technology Holdings Ltd., the Note Purchaser Shareholders
    (as defined therein) and the Second Lien Shareholders (as
    defined therein). 81




---



##### Table of Contents



ExhibitNumber

Description4.6#


Amended and Restated Shareholders Agreement, dated as of
    May 23, 2002, among Stratus Technologies Bermuda Holdings
    Ltd. (as assignee of Stratus Technologies Group, S.A.),
    Technology Holdings Ltd. (as assignee of Investcorp Stratus
    Limited Partnership, Stratus Holdings Limited, New Stratus
    Investments Limited, Intel Atlantic, Inc., Intel Capital Corp.
    and MidOcean Capital Partners Europe, L.P. (as assignee of DB
    Capital Partners Europe, L.P.)) and certain management
    stockholders party thereto.4.7#


Share Purchase and Shareholders Agreement, dated as of
    November 25, 2005, between Stratus Technologies Bermuda
    Holdings Ltd. (as successor to Stratus Technologies Group, S.A.)
    and NEC Corporation.4.8#


Share Purchase and Shareholders Agreement, dated as of
    April 5, 2005, between Stratus Technologies Bermuda
    Holdings Ltd. (as successor to Stratus Computer Systems
    International S.A.) and NEC Corporation.4.9#


Form of Management Shareholders Agreement.4.10#


Stratus Technologies, Inc. Stock Incentive Plan, Restatement
    No. 5, dated February 24, 2009.4.11#


Form of Employee Stock Option Agreement, as amended.4.12#


Form of Management Stock Option Agreement, as amended.4.13#


Form of Put Option Agreement.4.14#


Collaboration and Licensing Agreement, dated as of
    November 25, 2005, among Stratus Technologies Bermuda Ltd.,
    Stratus Technologies Ireland Limited and NEC Corporation.4.15#


Purchase and Distribution Agreement, dated as of
    November 25, 2005, among Stratus Technologies Bermuda Ltd.,
    Stratus Technologies Ireland Limited and NEC Corporation.4.16#


Agreement for Management Advisory, Strategic Planning and
    Consulting Services, dated as of October 1, 2005, between
    Investcorp International, Inc. and Stratus Technologies, Inc.4.17#


Amendment to Agreement for Management Advisory, Strategic
    Planning and Consulting Services, dated as of April 8,
    2010, between Investcorp International, Inc. and Stratus
    Technologies, Inc.4.18#


Agreement for Management Advisory, Strategic Planning and
    Consulting Services, dated as of October 1, 2005, between
    MidOcean US Advisor, LP and Stratus Technologies, Inc.4.19#


Amendment to Agreement for Management Advisory, Strategic
    Planning and Consulting Services, dated as of April 8,
    2010, between MidOcean US Advisor, LP and Stratus Technologies,
    Inc.7


Ratio of Earnings to Fixed Charges.8#


List of Subsidiaries.11


Code of Ethics.12.1


Section 302 Certifications of Principal Executive Officer.12.2


Section 302 Certifications of Principal Financial Officer.13


Section 906 Certifications of Principal Executive and
    Principal Financial Officer.     #
    
    Previously filed with the Registration Statement on
    Form F-4,
    No.
    333-171863,
    as filed with the Securities and Exchange Commission on
    January 25, 2011.
    
    Included herewith. 82




---



##### Table of Contents



SIGNATURES    
  By:
    /s/  Robert
    C. Laufer   Title:
    Vice President and Treasurer   83




---



##### Table of Contents



ITEM 18.
    FINANCIAL
    STATEMENTS  STRATUS
    TECHNOLOGIES BERMUDA HOLDINGS LTD.
  Index to
    Audited Consolidated Financial Statements
    Page No.Report of Independent Registered Public
    Accounting Firm


F-1Consolidated Balance Sheets 
    February 27, 2011 and February 28, 2010


F-2For the Fiscal Years Ended February 27, 2011 and
    February 28, 2010 and February 22, 2009:Consolidated Statements of Operations


F-3Consolidated Statements of Redeemable Convertible
    Preferred Stock and Stockholders Deficit


F-4Consolidated Statements of Cash Flows


F-5Notes to Consolidated Financial Statements


F-6  84




---



##### Table of Contents



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM       
    F-1




---



##### Table of Contents



STRATUS
    TECHNOLOGIES BERMUDA HOLDINGS LTD.CONSOLIDATED BALANCE
    SHEETS
  February 27,


February 28,2011


2010(Dollars in thousands, exceptper share data)ASSETSCurrent assets:Cash and cash equivalents

$
28,100


$
56,768Accounts receivable, net of allowance for doubtful accounts of
    $315 and $1,036, respectively


38,079



41,417Inventory


7,485



6,525Deferred income taxes


1,440



1,200Prepaid expenses and other current assets


4,370



5,420Total current assets


79,474



111,330Property and equipment, net


13,695



16,841Intangible assets, net


3,438



3,598Goodwill


9,584



9,544Deferred income taxes


1,803



1,723Deferred financing fees


10,993



2,983Other assets


4,867



4,251Total assets

$
123,854


$
150,270LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED STOCK AND
    STOCKHOLDERS DEFICITCurrent liabilities:Current portion of long-term debt

$
5,000


$
25,000Accounts payable


7,291



7,789Accrued expenses


25,611



17,706Income taxes payable


285



67Deferred revenue


36,199



42,029Total current liabilities


74,386



92,591Long-term debt, net of debt discount


249,069



291,906Embedded derivatives


18,955



Deferred revenue and other liabilities


12,170



9,892Total liabilities


354,580



394,389Commitments and contingencies (Note 9)Redeemable convertible preferred stock:Series A: 7,000 shares authorized and
    6,561 shares issued and outstanding at February 27,
    2011 and February 28, 2010 (liquidation preference of
    $101,101 and $93,612, respectively)


101,101



93,612Series B: 20,524 and 0 shares authorized; 3,532 and 0
    issued and outstanding at February 27, 2011 and
    February 28, 2010 (liquidation preference of $54,423 and 0,
    respectively)


54,423



Contingent right to future shares of Series B redeemable
    convertible preferred stock


5,518



Total redeemable convertible preferred stock


161,042



93,612Stockholders deficit:Ordinary stock, $0.5801 par value, 181,003 shares
    authorized and 28,809 shares issued and outstanding at
    February 27, 2011; 152,633 shares authorized and
    28,809 shares issued and outstanding at February 28,
    2010


16,712



16,712Series A ordinary stock: $0.5801 par value, 7,678 and
    0 shares authorized; 0 and 0 shares issued and
    outstanding at February 27, 2011 and February 28,
    2010, respectively






Series B ordinary stock: $0.5801 par value, 90,115 and
    0 shares authorized; 15,512 and 0 shares issued and
    outstanding at February 27, 2011 and February 28,
    2010, respectively


8,998



Additional paid in capital






9,704Accumulated deficit


(418,687
)


(364,010
)Accumulated other comprehensive gain (loss)


1,209



(137
)Total stockholders deficit


(391,768
)


(337,731
)Total liabilities, redeemable convertible preferred stock and
    stockholders deficit

$
123,854


$
150,270    F-2




---



##### Table of Contents



STRATUS
    TECHNOLOGIES BERMUDA HOLDINGS LTD.CONSOLIDATED STATEMENTS OF OPERATIONS
  February 27,


February 28,


February 22,2011


2010


2009(Dollars in thousands)REVENUEProduct

$
71,104


$
66,714


$
92,362Service


135,091



137,699



150,662Total revenue


206,195



204,413



243,024COST OF REVENUEProduct


32,892



30,011



46,939Service


58,359



61,566



67,538Total cost of revenue


91,251



91,577



114,477Gross profit


114,944



112,836



128,547OPERATING EXPENSESResearch and development


27,469



30,280



33,837Sales and marketing


29,643



28,867



36,126General and administrative


19,847



19,193



25,362Amortization of intangibles


52



1,975



2,227Restructuring charges


1,694



1,484



8,652(Gain) loss on sale of subsidiary


(3,655
)


(818
)


107Management fees


1,117



700



700Total operating expenses


76,167



81,681



107,011Profit from operations


38,777



31,155



21,536Interest income


80



461



235Interest expense


(43,728
)


(25,307
)


(32,820
)Loss on extinguishment of debt


(3,751
)






Other (expense) income


(1,751
)


1,920



918(Loss) income before income taxes


(10,373
)


8,229



(10,131
)Provision for income taxes


1,520



1,584



2,132Net (loss) income

$
(11,893
)

$
6,645


$
(12,263
)    F-3




---



##### Table of Contents



STRATUS
    TECHNOLOGIES BERMUDA HOLDINGS LTD.
  CONSOLIDATED
    STATEMENTS OF REDEEMABLE CONVERTIBLE PREFERRED STOCK AND
 STOCKHOLDERS
    DEFICIT
  Right toShares of Series B


Total





















AccumulatedRedeemable Convertible


Redeemable









Series B








OtherSeries A Redeemable


Series B Redeemable


Preferred


Convertible



Ordinary Stock


Ordinary Stock


Additional





Comprehensive


Total


ComprehensiveConvertible Preferred


Convertible Preferred





Par


Preferred






Par





Par


Paid-on


Accumulated


Income


Stockholders


(Loss)Shares


Value


Shares


Value


Shares


Value


Stock



Shares


Value


Shares


Value


Capital


Deficit


(Loss)


(Deficit)


Income(Dollars in thousands, except share data)Balance at February 24, 2008


6,561


$
80,257


















$
80,257




28,798


$
16,706










$
18,688


$
(358,392
)

$
(3,774
)

$
(326,772
)Net loss



















































(12,263
)






(12,263
)


(12,263
)Unrealized gain on derivative instrument























































2,314



2,314



2,314Unrealized foreign currency translation adjustment























































(1,835
)


(1,835
)


(1,835
)Unrealized loss on corporate equity security, (net of tax of $5)























































(47
)


(47
)


(47
)Accretion of Series A redeemable, convertible preferred
    stock to redemption value






6,421



















6,421




















(6,421
)










(6,421
)Exercise of employee stock options































11



6











9











15Stock-based compensation expense















































387











387Comprehensive loss






























































$
(11,831
)Balance at February 22, 2009


6,561


$
86,678


















$
86,678




28,809


$
16,712











12,663


$
(370,655
)

$
(3,342
)

$
(344,622
)Net income



















































6,645







6,645



6,645Unrealized gain on derivative instrument























































1,892



1,892



1,892Unrealized foreign currency translation adjustment























































1,324



1,324



1,324Unrealized loss on corporate equity security, (net of tax of $7)























































(11
)


(11
)


(11
)Accretion of Series A redeemable, convertible preferred
    stock to redemption value






6,934



















6,934




















(6,934
)










(6,934
)Stock-based compensation expense















































3,975











3,975Comprehensive income






























































$
9,850Balance at February 28, 2010


6,561


$
93,612



















93,612




28,809


$
16,712










$
9,704


$
(364,010
)

$
(137
)

$
(337,731
)Net loss



















































(11,893
)






(11,893
)


(11,893
)Unrealized foreign currency translation adjustment























































1,324



1,324



1,324Unrealized gain on corporate equity security, (net of tax of $2)























































22



22



22Issuance of Series B preferred shares, net of issuance cost
    of $428










3,532



11,023











11,023Accretion of Series B preferred stock to redemption value














43,400











43,400




















(10,047
)


(33,353
)






(43,400
)Issuance of Series B ordinary shares, net of issuance cost
    of $205







































15,512



8,998



(205
)


(3,395
)






5,398Accretion of Series A preferred stock to redemption value






7,489



















7,489




















(1,453
)


(6,036
)






(7,489
)Issuance of contingent right to shares of Series B ordinary















































1,533











1,533Issuance of contingent right to shares of Series B preferred






















5,518



5,518Stock-based compensation expense















































468











468Comprehensive loss






























































$
(10,547
)Balance at February 27, 2011


6,561


$
101,101



3,532



54,423







5,518


$
161,042




28,809


$
16,712



15,512


$
8,998






$
(418,687
)

$
1,209


$
(391,768
)    F-4




---



##### Table of Contents





STRATUS
    TECHNOLOGIES BERMUDA HOLDINGS LTD.CONSOLIDATED STATEMENTS OF CASH FLOWS
  February 27,


February 28,


February 22,2011


2010


2009(Dollars in thousands)OPERATING ACTIVITIESCash flows from operating activities:Net (loss) income

$
(11,893
)

$
6,645


$
(12,263
)Adjustments to reconcile net (loss) income to net cash providedby operating activities:Depreciation and amortization


9,147



12,580



16,559Amortization of deferred financing costs


8,466



2,596



2,596Stock-based compensation


468



3,975



387Non-cash portion of restructuring and other charges






(286
)


Deferred tax (income) expense


(2,163
)


(881
)


18Provision for doubtful accounts


163



1,092



517Inventory provision


959



1,660



3,097Loss on extinguishment of debt


3,751







Change in fair value of embedded derivatives


297







(Gain) loss on sale of subsidiary


(3,655
)


(818
)


107Loss on retirement of property and equipment


27



8



266Interest
    payable-in-kind


6,560



773



759Changes in assets and liabilities, net of the effect of the
    acquisitionAccounts receivable


3,840



11,700



8,175Inventory


(2,315
)


(2,116
)


960Prepaid expenses and other current assets


1,211



152



2,796Accounts payable


(721
)


(5,125
)


(3,222
)Accrued expenses


(140
)


(9,800
)


(4,067
)Interest payable


7,735



1,538



492Income taxes payable


184



174



(818
)Deferred revenue


(5,901
)


4,917



(420
)Other long-term assets and liabilities


3,729



1,195



1,650Net cash provided by operating activities


19,749



29,979



17,589INVESTING ACTIVITIESCash flows from investing activities:Acquisition of property and equipment


(6,238
)


(5,773
)


(6,388
)Proceeds from sale of subsidiary


3,555



1,000



1,900Price adjustment for sale of subsidiary






(110
)


Other long-term assets


(86
)


(67
)


(109
)Net cash used in investing activities


(2,769
)


(4,950
)


(4,597
)FINANCING ACTIVITIESCash flows from financing activities:Proceeds from exercise stock options










15Proceeds from issuance of long-term debt, Series B
    preferred stock and Series B ordinary stock


207,281







Payments on short and long-term debt


(218,000
)


(2,000
)


(2,000
)Payment of debt and equity issuance fees


(13,515
)


(566
)


Payments on interest rate swap and collar






(2,701
)


(2,154
)Proceeds from revolving credit facility


8,000



24,000



24,000Payments on revolving credit facility


(30,000
)


(24,000
)


(11,000
)Net cash (used in) provided by financing activities


(46,234
)


(5,267
)


8,861Effect of exchange rate changes on cash


586



1,981



(295
)Net (decrease) increase in cash and cash equivalents


(28,668
)


21,743



21,558Cash and cash equivalents at beginning of period


56,768



35,025



13,467Cash and cash equivalents at end of period

$
28,100


$
56,768


$
35,025Supplemental cash flow information:Cash paid for interest

$
20,979


$
23,075


$
30,255Cash paid for income taxes, net of refunds


1,479



1,610



2,944Supplemental disclosure of noncash investing and financing
    activities Accretion of preferred stock Series A


7,489



6,934



6,421Supplemental disclosure of noncash investing and financing
    activities Accretion of preferred stock Series B


43,400







    F-5




---



##### Table of Contents



STRATUS
    TECHNOLOGIES BERMUDA HOLDINGS LTD.
  NOTES
    TO CONSOLIDATED FINANCIAL STATEMENTS
 (Dollars
    in thousands, except per share data)
  NOTE 1 
    NATURE OF
    BUSINESS    i.e.
      NOTE 2 
    BASIS OF
    PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES  Basis
    of presentation and principles of consolidation
      Use of
    estimates
   F-6




---



##### Table of Contents



STRATUS
    TECHNOLOGIES BERMUDA HOLDINGS LTD.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
 (Dollars
    in thousands, except per share data)
    Fair
    value measurements
    
    Level 1  Quoted prices in active markets for
    identical assets or liabilities.
    Level 2  Inputs other than Level 1 that are
    observable, either directly or indirectly, such as quoted prices
    for similar assets or liabilities; quoted prices in markets that
    are not active; or other inputs that are observable or can be
    corroborated by observable market data for substantially the
    full term of the assets or liabilities.
    Level 3  Unobservable inputs that are supported
    by little or no market activity and that are significant to the
    fair value of the assets or liabilities.    Quoted Prices inTotal


Active Market for


Significant Other


SignificantFebruary 27,


Identical Assets


Observable


Unobservable2011


(Level 1)


Inputs (Level 2)


Inputs (Level 3)Assets:Cash equivalents in highly liquid money market fund

$
533


$
533


$



$
Investment in corporate equity security


37



37







Embedded derivative in Senior Secured Notes (see Note 8)


1,473











1,473Total

$
2,043


$
570


$



$
1,473Liabilities:Embedded derivatives in Senior Secured Notes (see Note 8)


18,955











18,955Total

$
18,955


$



$



$
18,955     Quoted Prices inTotal


Active Market for


Significant Other


SignificantFebruary 28,


Identical Assets


Observable Inputs


Unobservable Inputs2010


(Level 1)


(Level 2)


(Level 3)Assets:Cash equivalents in highly liquid money market fund

$
20,929


$
20,929


$



$
Investment in corporate equity security


34



34







Total

$
20,963


$
20,963


$



$
  F-7




---



##### Table of Contents



STRATUS
    TECHNOLOGIES BERMUDA HOLDINGS LTD.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
 (Dollars
    in thousands, except per share data)
        Assets:

2011


2010Balance, beginning of the year

$



$
Embedded derivatives at inception


2,451



Increase (decrease) to embedded derivatives


(978
)


Balance, end of the year

$
1,473


$
   Liabilities:

2011


2010Balance, beginning of the year

$



$
Embedded derivatives at inception


19,636



Increase (decrease) to embedded derivatives


(681
)


Balance, end of the year

$
18,955


$
     
    The Second Lien loan (Lien 2), issued pursuant to
    the Second Lien Credit Facility
    The Senior Secured Notes (the Notes)
    The Lien 2 holders contingent right to additional
    redeemable convertible preferred stock should the Company not
    repay Lien 2 in full by either April 30, 2013 or
    April 30, 2014 (the Contingent Preferred Equity)   F-8




---



##### Table of Contents



STRATUS
    TECHNOLOGIES BERMUDA HOLDINGS LTD.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
 (Dollars
    in thousands, except per share data)
              Cash
    and cash equivalents
    Restricted
    cash
   F-9




---



##### Table of Contents



STRATUS
    TECHNOLOGIES BERMUDA HOLDINGS LTD.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
 (Dollars
    in thousands, except per share data)
  Translation
    of foreign currencies
      Derivatives
        
    the Issuers right to redeem the Senior Secured Notes at a
    specified price in the event of an Equity Offering;
    the right of the holder of the Senior Secured Notes to sell back
    the Senior Secured Notes to the Company at a specified price in
    the event of a Change in Control;
    the Issuers requirement to make an offer to purchase the
    Senior Secured Notes with 100% of Excess Cash Flow for each
    annual period ending on the last day of each fiscal year ending
    on or after February 27, 2011 at 120% of the principal
    amount together with accrued and unpaid interest.    Concentration
    of credit risk
   F-10




---



##### Table of Contents



STRATUS
    TECHNOLOGIES BERMUDA HOLDINGS LTD.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
 (Dollars
    in thousands, except per share data)
          Accounts
    receivable
    Balance at

Charge

ForeignBeginning of

(Benefit) to

Exchange





Balance atYear

Expense

Impact

Recoveries

Write-Offs

End of YearFebruary 22, 2009

$
456



565







43



(391
)

$
673February 28, 2010

$
673



1,138



(6
)


45



(814
)

$
1,036February 27, 2011

$
1,036



201



(72
)


40



(890
)

$
315   Inventory
  (first-in,
    February 27,


February 28,2011


2010Parts and assemblies

$
2,146


$
1,375Work-in-process


826



823Finished products


4,513



4,327Total Inventory

$
7,485


$
6,525  F-11




---



##### Table of Contents



STRATUS
    TECHNOLOGIES BERMUDA HOLDINGS LTD.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
 (Dollars
    in thousands, except per share data)
  Property
    and equipment
    Machinery, computer equipment and software

2-5 yearsLeasehold improvements

shorter of lease term or life of assetService and spare parts

4 years       Goodwill
    and intangible assets
      Customer related intangibles

7-11 yearsTrademark and trade names

10 years to indefinite life   10-17 years
  Long-lived
    assets
    Investments
   F-12




---



##### Table of Contents



STRATUS
    TECHNOLOGIES BERMUDA HOLDINGS LTD.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
 (Dollars
    in thousands, except per share data)
  Fair
    Value of April 2010 Refinancing
    
    A second lien loan (Lien 2), issued pursuant to the
    Second Lien Credit Facility
    Senior secured notes (the Notes)
    The Companys right to redeem the debt at a specified price
    in the event of a future equity offering, the right of the
    Companys creditors to sell back the debt to it at a
    specified price in the event of a change in control, and the
    Companys requirement to make an offer to redeem a portion
    of the debt using a formula based on certain cash-flow metrics
    on the last day of each fiscal year ending on or after
    February 27, 2011, (collectively referred to as the
    Embedded Derivatives)
    Preferred stock and ordinary stock (the Preferred and
    Ordinary Shares)
    The Lien 2 holders contingent right to additional
    preferred and ordinary stock should the Company not repay Lien 2
    in full by either April 30, 2013 or April 30, 2014
    (the Contingent Equity)           F-13




---



##### Table of Contents



STRATUS
    TECHNOLOGIES BERMUDA HOLDINGS LTD.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
 (Dollars
    in thousands, except per share data)
      Revenue
    recognition
      and/or
 F-14




---



##### Table of Contents



STRATUS
    TECHNOLOGIES BERMUDA HOLDINGS LTD.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
 (Dollars
    in thousands, except per share data)
                Out of
    period revenue adjustments
   F-15




---



##### Table of Contents



STRATUS
    TECHNOLOGIES BERMUDA HOLDINGS LTD.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
 (Dollars
    in thousands, except per share data)
  out-of-period
    New
    Accounting Guidance
      Research
    and development and software development costs
    Income
    taxes
    Risks
    and uncertainties
   F-16




---



##### Table of Contents



STRATUS
    TECHNOLOGIES BERMUDA HOLDINGS LTD.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
 (Dollars
    in thousands, except per share data)
      Stock-based
    compensation
          2011


2010


2009Cost of revenue

$
119


$
882


$
107Selling, marketing, general and administrative


247



2,010



136Research and development


102



1,083



144Total stock-based compensation expense

$
468


$
3,975


$
387     Warranty
   F-17




---



##### Table of Contents



STRATUS
    TECHNOLOGIES BERMUDA HOLDINGS LTD.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
 (Dollars
    in thousands, except per share data)
    2011


2010


2009Balancing, beginning of the year

$
100


$
179


$
150Current period accrual


251



281



445Amounts charged to the accrual


(253
)


(360
)


(416
)Balance, end of the year

$
98


$
100


$
179   NOTE 3 
    RESTRUCTURING
    AND OTHER CHARGES    Excess FacilitySeverance and


Charges &Fringe Benefits


Other Exit Costs


TotalRestructuring Liability as of February 24, 2008

$
1,321


$
443


$
1,764Restructuring Charges


8,390



262



8,652Currency Translation


(590
)


(58
)


(648
)Cash payments


(6,769
)


(269
)


(7,038
)Restructuring Liability as of February 22, 2009


2,352



378



2,730Restructuring Charges


1,770



(286
)


1,484Currency Translation


18



(92
)


(74
)Cash payments


(1,803
)






(1,803
)Restructuring Liability as of February 28, 2010


2,337







2,337Restructuring Charges


1,694







1,694Currency Translation


(71
)






(71
)Cash payments


(2,662
)






(2,662
)Restructuring Liability as of February 27, 2011

$
1,298


$



$
1,298     Restructuring
    fiscal 2011
    Restructuring
    fiscal 2010
     F-18




---



##### Table of Contents



STRATUS
    TECHNOLOGIES BERMUDA HOLDINGS LTD.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
 (Dollars
    in thousands, except per share data)
    Restructuring
    fiscal 2009
    NOTE 4 
    PROPERTY
    AND EQUIPMENT    2011


2010Machinery, computer equipment and software

$
46,922


$
44,307Leasehold improvements


10,162



10,012Service and spare parts


26,320



29,258Total property and equipment


83,404



83,577Accumulated depreciation and amortization


(69,709
)


(66,736
)Property and equipment, net

$
13,695


$
16,841     NOTE 5 
    INTANGIBLE
    ASSETS    2011


2010Customer related intangibles

$
28,466


$
28,466Core technology


18,671



18,671Trademark and trade names


3,600



3,558Capitalized software


3,564



3,564Patents


2,001



1,957Total intangible assets


56,302



56,216Customer related amortization


(28,466
)


(28,414
)Core technology amortization


(18,671
)


(18,671
)Trademark and trade name amortization


(1,528
)


(1,507
)Capitalized software amortization


(3,441
)


(3,358
)Patent amortization


(758
)


(668
)Total accumulated amortization


(52,864
)


(52,618
)Intangible assets, net

$
3,438


$
3,598  F-19




---



##### Table of Contents



STRATUS
    TECHNOLOGIES BERMUDA HOLDINGS LTD.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
 (Dollars
    in thousands, except per share data)
      Fiscal Year2012

$
2102013


1672014


1272015


1272016 and thereafter


852Total

$
1,483   NOTE 6 
    ACCRUED
    EXPENSES    2011


2010Compensation and benefits

$
7,170


$
5,908Interest


10,625



2,889Restructuring


1,298



2,337Sales use and other taxes


674



458Other


5,844



6,114Total

$
25,611


$
17,706   NOTE 7 
    INCOME
    TAXES    2011


2010


2009United States

$
(10,703
)

$
1,082


$
(2,944
)Non-U.S.


330



7,147



(7,187
)(Loss) income before income taxes

$
(10,373
)

$
8,229


$
(10,131
)  F-20




---



##### Table of Contents



STRATUS
    TECHNOLOGIES BERMUDA HOLDINGS LTD.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
 (Dollars
    in thousands, except per share data)
    2011


2010


2009CURRENTUnited States  Federal

$
587


$
615


$
(220
)United States  State


173



136



75Non-U.S.


2,923



1,714



2,259Total Current

$
3,683


$
2,465


$
2,114DEFERREDUnited States  Federal


(725
)


(565
)


United States  State


(103
)


(86
)


Non-U.S.


(1,335
)


(230
)


18Total Deferred


(2,163
)


(881
)


18Provision for income taxes

$
1,520


$
1,584


$
2,132     2011


2010


2009Income tax at U.S. Federal statutory rate


(34.0
)%


34.0
%


(34.0
)%State income taxes, net of Federal benefit


0.5



0.4



0.5Tax effect of
    non-U.S.
    operations


11.3



(5.9
)


32.3Valuation allowance


35.2



(9.3
)


19.2Permanent items


4.4



1.4



2.3Other Net


(2.7
)


(1.3
)


0.7Effective tax rate


14.7
%


19.3
%


21.0
%  F-21




---



##### Table of Contents



STRATUS
    TECHNOLOGIES BERMUDA HOLDINGS LTD.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
 (Dollars
    in thousands, except per share data)
    2011


2010DEFERRED INCOME TAX ASSETSProperty and equipment

$
2,551


$
2,642Inventory/other reserves


5,712



4,649Intangibles


1,085



1,244Net operating loss carryforwards


12,607



14,928Capital loss carryforwards


654



651Stock-based compensation


1,889



1,737Original issue discount


5,543



Disallowed interest


4,438



Other


201



45Total gross deferred income tax assets


34,680



25,896Deferred income tax asset valuation allowance


(25,699
)


(22,337
)Total net deferred income tax assets


8,981



3,559DEFERRED INCOME TAX LIABILITIESPrepaid expenses


(195
)


(636
)Cancellation of debt income


(5,543
)


Total deferred income tax liabilities


(5,738
)


(636
)Total net deferred income tax assets

$
3,243


$
2,923       Beginning





EndingFiscal Year Ended

Balance

Additions

Deductions

BalanceFebruary 22, 2009

$
(26,110
)


(4,318
)


3,371


$
(27,057
)February 28, 2010

$
(27,057
)


(980
)


5,700


$
(22,337
)February 27, 2011

$
(22,337
)


(6,252
)


2,890


$
(25,699
)   Loss
    Carryforwards
   F-22




---



##### Table of Contents



STRATUS
    TECHNOLOGIES BERMUDA HOLDINGS LTD.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
 (Dollars
    in thousands, except per share data)
  Unremitted
    Earnings
  non-U.S. income
  Uncertain
    income tax positions
    2011


2010


2009Balance, beginning of year

$
188


$
310


$
730Settlement with taxing authority










(298
)Statute of limitation expirations


(125
)


(135
)


(130
)Foreign currency fluctuations


5



13



8Balance, end of year

$
68


$
188


$
310          F-23




---



##### Table of Contents



STRATUS
    TECHNOLOGIES BERMUDA HOLDINGS LTD.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
 (Dollars
    in thousands, except per share data)
  NOTE 8 
    DEBT    February 27,


February 28,2011


2010Senior Secured Notes

$
215,000


$
First Lien Credit Facility






193,000Second Lien Credit Facility


81,755



101,906Revolving Credit Facility






Previous Revolving Credit Facility






22,000$
296,755


$
316,906Debt Discount


(42,686
)


Total

$
254,069


$
316,906           Second
    Lien Credit Agreement
  paid-in-kind paid-in-kind
 F-24




---



##### Table of Contents



STRATUS
    TECHNOLOGIES BERMUDA HOLDINGS LTD.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
 (Dollars
    in thousands, except per share data)
        Senior
    Secured Notes and Equity
       F-25




---



##### Table of Contents



STRATUS
    TECHNOLOGIES BERMUDA HOLDINGS LTD.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
 (Dollars
    in thousands, except per share data)
      
    the Issuers right to redeem the Senior Secured Notes at a
    specified price in the event of an Equity Offering;
    the right of the holder of the Senior Secured Notes to sell back
    the Senior Secured Notes to the Company at a specified price in
    the event of a Change in Control;
    the Issuers requirement to make an offer to purchase the
    Senior Secured Notes with 100% of Excess Cash Flow for each
    annual period ending on the last day of each fiscal year ending
    on or after February 27, 2011 at 120% of the principal
    amount together with accrued and unpaid interest.      Second
    Lien Credit Agreement and Senior Secured Notes
    F-26




---



##### Table of Contents



STRATUS
    TECHNOLOGIES BERMUDA HOLDINGS LTD.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
 (Dollars
    in thousands, except per share data)
  Allocated AmountSenior Secured Notes


184,458Second Lien Credit Agreement Notes


58,629Series B preferred stock


11,451Series B ordinary stock


5,603Right to shares of Series B preferred stock


5,518Right to shares of Series B ordinary stock


1,533       Revolving
    Credit Facility
     F-27




---



##### Table of Contents



STRATUS
    TECHNOLOGIES BERMUDA HOLDINGS LTD.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
 (Dollars
    in thousands, except per share data)
  Capitalized
    Registration Fees
    paid-in-kind paid-in-kind
  Fiscal

Payment2012

$
5,0002013


5,0002014


5,0002015


5,0002016 and subsequent years


276,755Total

$
296,755   NOTE 9 
    COMMITMENTS
    AND CONTINGENCIES      OperatingFiscal Year Ending

Leases2012

$
5,6292013


5,1972014


4,9932015


4,3802016 and subsequent years


5,727Total future minimum lease payments

$
25,926   Legal
    matters
     F-28




---



##### Table of Contents



STRATUS
    TECHNOLOGIES BERMUDA HOLDINGS LTD.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
 (Dollars
    in thousands, except per share data)
  Purchase
    commitments
    Guarantor
    arrangements
        NOTE 10 
    REDEEMABLE
    CONVERTIBLE PREFERRED STOCK    Preference
    Shares
   F-29




---



##### Table of Contents



STRATUS
    TECHNOLOGIES BERMUDA HOLDINGS LTD.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
 (Dollars
    in thousands, except per share data)
    2012


2013


2014


2015


2016Series A

$
109,189


$
117,924


$
127,358


$
137,547


$
148,551Series B

$
58,776


$
63,478


$
68,557


$
74,041


$
79,965   winding-up,
    Voting
    Rights
    Conversion
    Dividends
    Redemption
     F-30




---



##### Table of Contents



STRATUS
    TECHNOLOGIES BERMUDA HOLDINGS LTD.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
 (Dollars
    in thousands, except per share data)
    Liquidation
    Preference
    Right
    to additional Series B preferred shares
    NOTE 11 
    STOCKHOLDERS
    DEFICIT  Ordinary
    Shares
    Right
    to additional Series B ordinary shares
    NOTE 12 
    STOCK-BASED
    COMPENSATION  Stock
    options
   F-31




---



##### Table of Contents



STRATUS
    TECHNOLOGIES BERMUDA HOLDINGS LTD.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
 (Dollars
    in thousands, except per share data)
               F-32




---



##### Table of Contents



STRATUS
    TECHNOLOGIES BERMUDA HOLDINGS LTD.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
 (Dollars
    in thousands, except per share data)
    For Fiscal Year

2011

2010

2009Option term (in years)*

8.0

9.0

9.0Volatility**

37%

45%

45%Risk-free interest rate (zero coupon U.S. treasury note)

3.8%

3.9%

4.5%Dividend yield

0%

0%

0%Weighted-average fair value per option granted

$0.07

$0.22

$0.09     *
    
    The option term is the number of years the Company estimates,
    using historical data, that options will be outstanding prior to
    exercise or forfeiture.**
    
    The Companys estimates of expected volatility are
    principally based on daily price changes of the stock of
    comparable public companies over the expected option term as
    well as guidance provided by the accounting standard for stock
    based compensation.        Weighted-


Weighted-Average


AverageShares Under


Exercise


RemainingOptions


Price


Contractual TermOutstanding at February 28, 2010


23,884,297


$
0.72



8.38Granted


899,600


$
0.60Canceled


(1,881,784
)

$
0.81Forfeited


(668,140
)

$
0.61Outstanding at February 27, 2011


22,233,973


$
0.72



7.61Exercisable at February 27, 2011


17,795,661


$
0.74



7.36Exercisable and expected to vest at February 27, 2011


21,862,028


$
0.72



7.59  F-33




---



##### Table of Contents



STRATUS
    TECHNOLOGIES BERMUDA HOLDINGS LTD.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
 (Dollars
    in thousands, except per share data)
    Weighted-Average





WeightedOutstanding


Remaining


Exercisable


AverageExercise Price..

Number


Contractual Life


Number


Exercise Price$      0.60


19,636,712



8.34



15,230,375


$
0.60$      1.50


2,254,503



2.00



2,254,503



1.50$      2.00


326,298



3.04



294,323



2.00$      4.52


6,300



5.12



6,300



4.52$      6.50


10,160



0.18



10,160



6.50$0.60-$6.50


22,233,973



7.61



17,795,661


$
0.74     NOTE 13 
    ACCUMULATED
    OTHER COMPREHENSIVE INCOME (LOSS)    2011


2010


2009Foreign currency translation

$
1,207


$
(117
)

$
(1,441
)Net loss on derivative instruments










(1,892
)Unrealized gain (loss) on corporate equity security (net of tax)


2



(20
)


(9
)Total accumulated other comprehensive income (loss)

$
1,209


$
(137
)

$
(3,342
)   NOTE 14 
    EMPLOYEE
    BENEFIT PLANS    NOTE 15 
    SALE OF A
    SUBSIDIARY   F-34




---



##### Table of Contents



STRATUS
    TECHNOLOGIES BERMUDA HOLDINGS LTD.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
 (Dollars
    in thousands, except per share data)
      NOTE 16 
    SEGMENT,
    GEOGRAPHIC AND CUSTOMER INFORMATION    United States

Japan

EMEA

Asia

Other

Eliminations

TotalRevenues from external customersProduct2009


29,513



23,710



21,478



15,922



1,739







92,3622010


23,115



16,659



11,990



12,632



2,318







66,7142011

$
18,991


$
19,498


$
16,051


$
12,829


$
3,735


$



$
71,104Service2009


68,216



29,323



41,412



11,687



24







150,6622010


63,725



30,228



33,399



10,326



21







137,6992011

$
64,799


$
29,359


$
29,757


$
11,164


$
12


$



$
135,091Long-lived assets2009


17,720



2,426



2,368



1,966



207



(985
)


23,7022010


15,087



1,500



2,409



814



218



18



20,0462011

$
11,325


$
1,502


$
2,338


$
606


$
1,310


$



$
17,081       2011


2010


2009Legacy

$
21,821


$
24,813


$
29,019ftServer


48,137



41,738



63,324Avance


1,146



163



19Total product revenue

$
71,104


$
66,714


$
92,362    F-35




---



##### Table of Contents



STRATUS
    TECHNOLOGIES BERMUDA HOLDINGS LTD.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
 (Dollars
    in thousands, except per share data)
  NOTE 17 
    RELATED
    PARTY TRANSACTIONS        NOTE 18 
    CONSOLIDATING
    FINANCIAL STATEMENTS           F-36




---



##### Table of Contents



STRATUS
    TECHNOLOGIES BERMUDA HOLDINGS LTD.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  As of
    February 27, 2011
 CONSOLIDATING
    BALANCE SHEET
  Bermuda








Guarantor


Non GuarantorHoldings


Bermuda Ltd.


Stratus US


Subsidiaries


Subsidiaries


Eliminations


Total(In thousands)ASSETSCurrent assets:Cash and cash equivalents

$
20


$
580


$
3,819


$
16,830


$
6,851


$



$
28,100Accounts receivable, net of allowance for doubtful accounts






75



6,658



20,432



10,914







38,079Intercompany receivable


30,654







86,599







10,547



(127,800
)


Inventory










6,893



1,095



1,774



(2,277
)


7,485Deferred income taxes


















1,440







1,440Income taxes receivable










163



73







(236
)


Prepaid expenses and other current assets


500



116



2,389



271



1,319



(225
)


4,370Total current assets


31,174



771



106,521



38,701



32,845



(130,538
)


79,474Property and equipment, net










11,094



992



1,609







13,695Intangible assets, net






3,098



340















3,438Goodwill






6,197



1,306



1,345



736







9,584Deferred income taxes


















1,803







1,803Deferred financing






4,709



6,284















10,993Investment in subsidiaries






42,252



39,012



1,888







(83,152
)


Other assets


1,304



732



1,018



57



1,756







4,867Long-term intercompany receivable










48,125











(48,125
)


Total assets

$
32,478


$
57,759


$
213,700


$
42,983


$
38,749


$
(261,815
)

$
123,854LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED STOCK AND
    STOCKHOLDERS DEFICITCurrent liabilities:Current portion of long-term debt





$
2,400


$
2,600














$
5,000Accounts payable










2,031



2,622



2,676



(38
)


7,291Intercompany payable


22



56,431



8,079



63,268







(127,800
)


Accrued expenses


317



5,136



11,522



1,393



7,430



(187
)


25,611Income taxes payable






132











389



(236
)


285Deferred revenue










493



34,120



1,586







36,199Total current liabilities


339



64,099



24,725



101,403



12,081



(128,261
)


74,386Long-term debt






119,770



129,299















249,069Long-term intercompany payable






48,125















(48,125
)


Liability in subsidiaries


22,421



















(22,421
)


Embedded derivatives






9,098



9,857















18,955Deferred revenue and other liabilities






890



5,671



5,204



405







12,170Total liabilities


22,760



241,982



169,552



106,607



12,486



(198,807
)


354,580Redeemable convertible preferred stock:Series A redeemable convertible preferred stock


101,101























101,101Series B redeemable convertible preferred stock


54,423























54,423Right to shares of Series B redeemable convertible
    preferred stock


5,518























5,518Total redeemable convertible preferred stock


161,042























161,042Stockholders (Deficit) Equity:Ordinary stock


16,712



71



20,000



2,370



5,318



(27,759
)


16,712Series B Ordinary Stock


8,998























8,998Additional paid in capital


(3,330
)


29,562



56,100



126



4,379



(86,837
)


Accumulated deficit


(173,704
)


(213,856
)


(32,045
)


(66,435
)


15,932



51,421



(418,687
)Accumulated other comprehensive gain










93



315



634



167



1,209Total stockholders (deficit) equity


(151,324
)


(184,223
)


44,148



(63,624
)


26,263



(63,008
)


(391,768
)Total liabilities and stockholders (deficit) equity

$
32,478


$
57,759


$
213,700


$
42,983


$
38,749


$
(261,815
)

$
123,854  F-37




---



##### Table of Contents



STRATUS
    TECHNOLOGIES BERMUDA HOLDINGS LTD.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  As of
    February 28, 2010
    CONSOLIDATING BALANCE SHEET
  Bermuda








Guarantor


Non GuarantorHoldings


Bermuda Ltd.


Stratus US


Subsidiaries


Subsidiaries


Eliminations


Total(In thousands)ASSETSCurrent assets:Cash and cash equivalents

$
131


$
5


$
22,194


$
30,298


$
4,140


$



$
56,768Accounts receivable, net of allowance for doubtful accounts










9,788



23,785



7,844







41,417Intercompany receivable


771







35,410







11,315



(47,496
)


Inventory










5,874



2,022



2,964



(4,335
)


6,525Deferred income taxes


















1,200







1,200Income taxes receivable










185



130







(315
)


Prepaid expenses and other current assets






107



3,103



31



2,757



(578
)


5,420Total current assets


902



112



76,554



56,266



30,220



(52,724
)


111,330Property and equipment, net










13,770



984



2,069



18



16,841Intangible assets, net






2,824



774















3,598Goodwill






6,197



1,306



1,345



696







9,544Deferred income taxes


















1,723







1,723Deferred financing






1,344



1,639















2,983Investment in subsidiaries






21,839



36,323



1,872







(60,034
)


Other assets


111



627



1,872







1,641







4,251Long-term intercompany receivable


7,850







90,568











(98,418
)


Total assets

$
8,863


$
32,943


$
222,806


$
60,467


$
36,349


$
(211,158
)

$
150,270LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED STOCK AND
    STOCKHOLDERS DEFICITCurrent liabilities:Current portion of long-term debt

$



$
12,082


$
12,918


$



$



$



$
25,000Accounts payable










1,748



4,254



2,095



(308
)


7,789Intercompany payable






33,391



10,064



4,043







(47,498
)


Accrued expenses


(8
)


1,543



7,334



1,653



7,454



(270
)


17,706Income taxes payable






120











262



(315
)


67Deferred revenue










1,687



38,249



2,093







42,029Total current liabilities


(8
)


47,136



33,751



48,199



11,904



(48,391
)


92,591Long-term debt






130,455



161,451















291,906Long-term intercompany payable






25,975







72,443







(98,418
)


Liability in subsidiaries


8,821



















(8,821
)


Deferred revenue and other liabilities










4,198



5,059



635







9,892Total liabilities


8,813



203,566



199,400



125,701



12,539



(155,630
)


394,389Redeemable convertible preferred stock and stockholders
    deficit:Series A redeemable convertible preferred stock


93,612























93,612Total redeemable convertible preferred stock


93,612























93,612Stockholders (Deficit) Equity:Ordinary stock


16,712



71



20,000



2,370



5,318



(27,759
)


16,712Additional paid in capital


6,841



29,562



25,715



118



4,304



(56,836
)


9,704Accumulated deficit


(117,115
)


(200,256
)


(22,418
)


(68,029
)


14,908



28,900



(364,010
)Accumulated other comprehensive (loss) gain










109



307



(720
)


167



(137
)Total stockholders (deficit) equity


(93,562
)


(170,623
)


23,406



(65,234
)


23,810



(55,528
)


(337,731
)Total liabilities and stockholders (deficit) equity

$
8,863


$
32,943


$
222,806


$
60,467


$
36,349


$
(211,158
)

$
150,270  F-38




---



##### Table of Contents



STRATUS
    TECHNOLOGIES BERMUDA HOLDINGS LTD.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Twelve-month
    period ended February 27, 2011
    CONSOLIDATING STATEMENT OF OPERATIONS
  Bermuda


Bermuda





Guarantor


Non GuarantorHoldings


Ltd


Stratus US


Subsidiaries


Subsidiaries


Eliminations


Total(In thousands)REVENUEProduct





$
370


$
20,255


$
6,078


$
44,401






$
71,104Service






375



8,974



112,116



13,626







135,091Intercompany






46,037



84,298



32,975



16,780



(180,090
)


Total revenue






46,782



113,527



151,169



74,807



(180,090
)


206,195COST OF REVENUEProduct






215



17,522



27,547



30,708



(43,100
)


32,892Service










31,967



3,290



23,113



(11
)


58,359Intercompany






29,131







106,791



3,126



(139,048
)


Total cost of revenue






29,346



49,489



137,628



56,947



(182,159
)


91,251Gross profit






17,436



64,038



13,541



17,860



2,069



114,944OPERATING EXPENSESResearch and development










27,483



30







(44
)


27,469Sales and marketing










16,248



4



13,415



(24
)


29,643General and administrative


390



145



14,896



437



3,882



97



19,847Amortization of intangibles






52



















52Restructuring charges










1,632



1



61







1,694(Gain) on sale of business






(3,655
)


















(3,655
)Intercompany










(1,632
)


1,693



(61
)






Management fees


417







700















1,117Total operating expenses


807



(3,458
)


59,327



2,165



17,297



29



76,167Profit (loss) from operations


(807
)


20,894



4,711



11,376



563



2,040



38,777Interest income






41



7



28



4







80Interest expense






(20,825
)


(22,903
)














(43,728
)Interest income (expense), intercompany


608



(2,117
)


8,195



(6,686
)










Loss on extinguishment of debt






(1,724
)


(2,027
)














(3,751
)Other (expense), net


(10
)


(196
)


(520
)


(685
)


(215
)


(125
)


(1,751
)Other income (expense), intercompany














(1,398
)


1,398







(Loss) income before income taxes


(209
)


(3,927
)


(12,537
)


2,635



1,750



1,915



(10,373
)Provision (benefit) for income taxes






86



(12
)


930



516







1,520Equity in profit (loss) in subsidiaries


(13,600
)


(9,587
)


2,568



15







20,604



Net (loss) income

($
13,809
)

($
13,600
)

($
9,957
)

$
1,720


$
1,234


$
22,519


($
11,893
)  F-39




---



##### Table of Contents



STRATUS
    TECHNOLOGIES BERMUDA HOLDINGS LTD.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Twelve-month
    period ended February 28, 2010
    CONSOLIDATING STATEMENT OF OPERATIONS
  Bermuda


Bermuda





Guarantor


Non GuarantorHoldings


Ltd


Stratus US


Subsidiaries


Subsidiaries


Eliminations


Total(In thousands)REVENUEProduct

$



$
84


$
23,853


$
6,211


$
36,566


$



$
66,714Service










6,541



117,486



13,672







137,699Intercompany






47,563



80,195



27,078



17,499



(172,335
)


Total revenue






47,647



110,589



150,775



67,737



(172,335
)


204,413COST OF REVENUEProduct






234



11,386



23,117



24,906



(29,632
)


30,011Service










32,360



3,334



26,095



(223
)


61,566Intercompany






33,974







107,366







(141,340
)


Total cost of revenue






34,208



43,746



133,817



51,001



(171,195
)


91,577Gross profit






13,439



66,843



16,958



16,736



(1,140
)


112,836OPERATING EXPENSESResearch and development










30,456



31







(207
)


30,280Sales and marketing










15,654







13,338



(125
)


28,867General and administrative


450



48



15,240



378



3,525



(448
)


19,193Amortization of intangibles






290







1,685











1,975Restructuring charges










814



(294
)


964







1,484(Gain) Loss on sale of subsidiary






(900
)


101



(19
)










(818
)Intercompany










(814
)


1,924



(1,015
)


(95
)


Management fees










700















700Total operating expenses


450



(562
)


62,151



3,705



16,812



(875
)


81,681Profit (loss) from operations


(450
)


14,001



4,692



13,253



(76
)


(265
)


31,155Interest income


1



400



19



28



13







461Interest expense






(11,680
)


(13,613
)


(13
)


(1
)






(25,307
)Interest income (expense), intercompany


608



(2,134
)


9,776



(8,250
)










Other income (expense), net


(10
)


(88
)


(117
)


2,222



(56
)


(31
)


1,920Other income (expense), intercompany










(317
)


(1,381
)


1,698







Income (loss) before income taxes


149



499



440



5,859



1,578



(296
)


8,229Provision for income taxes






133



101



925



425







1,584Equity in profit (loss) in subsidiaries


6,791



6,425



1,508



20







(14,744
)


Net income (loss)

$
6,940


$
6,791


$
1,847


$
4,954


$
1,153


$
(15,040
)

$
6,645  F-40




---



##### Table of Contents



STRATUS
    TECHNOLOGIES BERMUDA HOLDINGS LTD.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Twelve-month
    period ended February 22, 2009
    CONSOLIDATING STATEMENT OF OPERATIONS
  Bermuda


Bermuda





Guarantor


Non GuarantorHoldings


Ltd


Stratus US


Subsidiaries


Subsidiaries


Eliminations


Total(In thousands)REVENUEProduct

$



$
27


$
28,671


$
11,995


$
51,669


$



$
92,362Service










7,279



128,757



14,626







150,662Intercompany






50,980



92,728



24,772



20,330



(188,810
)


Total revenue






51,007



128,678



165,524



86,625



(188,810
)


243,024COST OF REVENUEProduct






1,207



13,660



32,017



33,575



(33,520
)


46,939Service










34,339



4,030



29,793



(624
)


67,538Intercompany






36,851







121,246







(158,097
)


Total cost of revenue






38,058



47,999



157,293



63,368



(192,241
)


114,477Gross profit






12,949



80,679



8,231



23,257



3,431



128,547OPERATING EXPENSESResearch and development






(400
)


34,909



32



2



(706
)


33,837Sales and marketing










20,625







16,045



(544
)


36,126General and administrative


105



32



19,880



455



4,923



(33
)


25,362Amortization of intangibles






469







1,758











2,227Restructuring charges










4,485







4,167







8,652Loss (gain) on sale of subsidiary






93



48



(34
)










107Intercompany










(4,485
)


9,379



(4,119
)


(775
)


Management fees










700















700Total operating expenses


105



194



76,162



11,590



21,018



(2,058
)


107,011Profit (loss) from operations


(105
)


12,755



4,517



(3,359
)


2,239



5,489



21,536Interest income


2



1



60



113



59







235Interest expense






(15,332
)


(17,434
)


(52
)


(2
)






(32,820
)Interest income (expense), intercompany


608



(2,149
)


9,781



(8,240
)










Other income (expense), net


(10
)


12



(417
)


1,086



345



(98
)


918Other income (expense), intercompany










268



(1,605
)


1,337







(Loss) income before income taxes


495



(4,713
)


(3,225
)


(12,057
)


3,978



5,391



(10,131
)Provision (benefit) for income taxes






39



(145
)


956



1,282







2,132Equity in profit (loss) in subsidiaries


(18,150
)


(13,399
)


2,689











28,860



Net (loss) income

$
(17,655
)

$
(18,151
)

$
(391
)

$
(13,013
)

$
2,696


$
34,251


$
(12,263
)  F-41




---



##### Table of Contents



STRATUS
    TECHNOLOGIES BERMUDA HOLDINGS LTD.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Twelve-month
    period ended February 27, 2011
    CONSOLIDATING STATEMENT OF CASH FLOWS
  Bermuda


Bermuda


Stratus


Guarantor


Non GuarantorHoldings


Ltd


US


Subsidiaries


Subsidiaries


Eliminations


Total(In thousands)Operating activitiesCash flows from operating activities:Net (loss) income

$
(13,809
)

$
(13,600
)

$
(9,957
)

$
1,720


$
1,234


$
22,519


$
(11,893
)Adjustments to reconcile net loss to net cash provided by
    operating activities:Depreciation and amortization






163



7,381



426



1,159



18



9,147Amortization of deferred financing cost






3,918



4,548















8,466Stock-based compensation










384



9



75







468Deferred tax (income) expense










(828
)


(1,288
)


(47
)






(2,163
)Provision for doubtful accounts










(18
)


270



(89
)






163Inventory provision










1,472



(541
)


28







959Loss on debt extinguishment






1,800



1,951















3,751Change in fair value of embedded derivatives






142



155















297(Gain) from sale of subsidiary






(3,655
)


















(3,655
)Loss on retirement of property and equipment










27















27Interest
    payable-in-kind






3,170



3,390















6,560Equity in profit (loss) subsidiaries


13,600



9,587



(2,568
)


(15
)






(20,604
)


Changes in assets and liabilities:Accounts receivable






(75
)


3,149



3,083



(2,317
)






3,840Inventory










(3,055
)


1,468



1,329



(2,057
)


(2,315
)Prepaid expenses and other current assets


(500
)


(9
)


715



(240
)


1,599



(354
)


1,211Accounts payable


1,466



3,912



(7,081
)


26



561



395



(721
)Accrued expenses


325



(20
)


167



(263
)


(432
)


83



(140
)Interest payable






3,713



4,022















7,735Income taxes payable






12



22



57



93







184Deferred revenue










(1,194
)


(4,050
)


(657
)






(5,901
)Other long-term assets and liabilities


25



(907
)


3,151



1,132



328







3,729Net cash provided by operating activities


1,107



8,151



5,833



1,794



2,864







19,749Investing activitiesCash flows from investing activities:Acquisition of property and equipment










(5,280
)


(262
)


(696
)






(6,238
)Proceeds from sale of subsidiary






3,555



















3,555Acquisition of other long lived assets






(86
)


















(86
)Net cash (used in) provided by investing activities






3,469



(5,280
)


(262
)


(696
)






(2,769
)Financing activitiesCash flows from financing activities:Proceeds from issuance of long-term debt, Series B
    preferred stock and Series B ordinary stock






99,495



107,786















207,281Payments on long-term debt






(105,359
)


(112,641
)














(218,000
)Payment of debt and equity issuance fees


(1,218
)


(5,189
)


(7,108
)














(13,515
)Proceeds (payments) on intercompany financing










15,000



(15,000
)










Proceeds from revolving credit facility










8,000















8,000Payments on revolving credit facility










(30,000
)














(30,000
)Net cash (used in) financing activities


(1,218
)


(11,053
)


(18,963
)


(15,000
)










(46,234
)Effect of exchange rate changes on cash






8



35







543







586Net (decrease) increase in cash and cash equivalents


(111
)


575



(18,375
)


(13,468
)


2,711







(28,668
)Cash and cash equivalents at beginning of period


131



5



22,194



30,298



4,140







56,768Cash and cash equivalents at end of period

$
20


$
580


$
3,819


$
16,830


$
6,851






$
28,100  F-42




---



##### Table of Contents



STRATUS
    TECHNOLOGIES BERMUDA HOLDINGS LTD.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Twelve-month
    period ended February 28, 2010
    CONSOLIDATING STATEMENT OF CASH FLOWS
  Bermuda


Bermuda





Guarantor


Non GuarantorHoldings


Ltd


Stratus US


Subsidiaries


Subsidiaries


Eliminations


Total(In thousands)Operating activitiesCash flows from operating activities:Net Income (loss)

$
6,940


$
6,791


$
1,847


$
4,954


$
1,153


$
(15,040
)

$
6,645Adjustments to reconcile net loss to net cash provided by
    operating activities:Depreciation and amortization






420



9,315



2,240



1,608



(1,003
)


12,580Amortization of deferred financing cost






1,163



1,433















2,596Stock-based compensation










3,414



16



545







3,975Non-cash portion of restructuring and other charges










(286
)














(286
)Deferred tax (income) expense


















(881
)






(881
)Provision for doubtful accounts










30



959



103







1,092Inventory provision










1,579



(800
)


881







1,660(Gain) loss from sale of subsidiary






(900
)


101



(19
)










(818
)Loss on retirement of property and equipment










8















8Interest
    payable-in-kind






374



399















773Equity in (profit) loss subsidiaries


(6,791
)


(6,425
)


(1,508
)


(20
)






14,744



Changes in assets and liabilities:Accounts receivable










(2,691
)


6,150



8,241







11,700Inventory










(4,051
)


538



134



1,263



(2,116
)Prepaid expenses and other current assets










7



74



(79
)


150



152Accounts payable


(450
)


(929
)


20,079



(9,829
)


(13,947
)


(49
)


(5,125
)Accrued expenses


5



55



(5,993
)


(1,892
)


(1,910
)


(65
)


(9,800
)Interest payable






734



804















1,538Income taxes payable






120



(1
)


(91
)


146







174Deferred revenue






(18
)


494



5,004



(563
)






4,917Other long-term assets and liabilities


(111
)


200



(200
)


(997
)


2,303







1,195Net cash provided by (used in) operating activities


(407
)


1,584



24,781



6,287



(2,266
)






29,979Investing activitiesCash flows from investing activities:Acquisition of property and equipment










(4,368
)


(391
)


(1,014
)






(5,773
)Proceeds from sale of subsidiary






1,000



















1,000Price adjustment for sale of subsidiary










(110
)














(110
)Acquisition of other long term assets






(67
)


















(67
)Net cash (used in) provided by investing activities






933



(4,478
)


(391
)


(1,014
)






(4,950
)Financing activitiesCash flows from financing activities:Deferred financing fees






(272
)


(294
)














(566
)Payments on interest rate swap and collar






(1,296
)


(1,405
)














(2,701
)Payments on short and long-term debt






(967
)


(1,033
)














(2,000
)Proceeds from revolving credit facility










24,000















24,000Payments on revolving credit facility










(24,000
)














(24,000
)Net cash (used in) financing activities






(2,535
)


(2,732
)














(5,267
)Effect of exchange rate changes on cash


1



1



56







1,923







1,981Net increase (decrease) in cash and cash equivalents


(406
)


(17
)


17,627



5,896



(1,357
)






21,743Cash and cash equivalents at beginning of period


537



22



4,567



24,402



5,497







35,025Cash and cash equivalents at end of period

$
131


$
5


$
22,194


$
30,298


$
4,140






$
56,768  F-43




---



##### Table of Contents



STRATUS
    TECHNOLOGIES BERMUDA HOLDINGS LTD.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Twelve-month
    period ended February 22, 2009
    CONSOLIDATING STATEMENT OF CASH FLOWS
  Bermuda


Bermuda





Guarantor


Non GuarantorHoldings


Ltd


Stratus US


Subsidiaries


Subsidiaries


Eliminations


Total(In thousands)Operating activitiesCash flows from operating activities:Net (Loss) income

$
(17,655
)

$
(18,151
)

$
(391
)

$
(13,013
)

$
2,696


$
34,251


$
(12,263
)Adjustments to reconcile net loss to net cash provided by
    operating activities:Depreciation and amortization






1,566



11,929



2,401



2,657



(1,994
)


16,559Amortization of deferred financing cost






1,163



1,433















2,596Stock-based compensation










276



14



97







387Deferred tax (income) expense


















18







18Provision for doubtful accounts










(70
)


591



(4
)






517Inventory provision










8,368



(4,250
)


(1,021
)






3,097Loss (gain) from sale of subsidiary






93



49



(35
)










107Loss (gain) on retirement of property and equipment






(170
)


436















266Interest
    payable-in-kind






367



392















759Equity in (profit) loss subsidiaries


18,150



13,399



(2,689
)










(28,860
)


Changes in assets and liabilities:Accounts receivable






698



5,238



4,403



(2,164
)






8,175Inventory






(102
)


(7,791
)


6,306



6,043



(3,496
)


960Prepaid expenses and other current assets






(16
)


(803
)


860



2,324



431



2,796Accounts payable


106



1,467



(20,325
)


20,419



(4,766
)


(123
)


(3,222
)Accrued expenses


(151
)


124



(974
)


(1,210
)


(1,650
)


(206
)


(4,067
)Interest payable






234



258















492Income taxes payable










(731
)


17



(104
)






(818
)Deferred revenue






206



(1,067
)


1,646



(1,205
)






(420
)Other long-term assets and liabilities






(670
)


3,748



(580
)


(845
)


(3
)


1,650Net cash provided by (used in) operating activities


451



207



(2,714
)


17,569



2,076







17,589Investing activitiesCash flows from investing activities:Acquisition of property and equipment










(5,153
)






(1,235
)






(6,388
)Proceeds from sale of subsidiary






1,900



















1,900Acquisition of other long term assets






(109
)


















(109
)Net cash (used in) provided by investing activities






1,791



(5,153
)






(1,235
)






(4,597
)Financing activitiesCash flows from financing activities:Payments on short and long-term debt






(967
)


(1,033
)














(2,000
)Proceeds from exercise of stock option


15























15Payments on interest rate swap and collar






(1,036
)


(1,118
)














(2,154
)Proceeds from revolving credit facility










24,000















24,000Payments on revolving credit facility










(11,000
)














(11,000
)Net cash provided by (used in) financing activities


15



(2,003
)


10,849















8,861Effect of exchange rate changes on cash






(1
)


109



(205
)


(198
)






(295
)Net increase (decrease) in cash and cash equivalents


466



(6
)


3,091



17,364



643







21,558Cash and cash equivalents at beginning of period


71



28



1,477



7,039



4,852







13,467Cash and cash equivalents at end of period

$
537


$
22


$
4,568


$
24,403


$
5,495


$



$
35,025  F-44




---



##### Table of Contents



STRATUS
    TECHNOLOGIES BERMUDA HOLDINGS LTD.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
 (Dollars
    in thousands, except per share data)
  NOTE 19 
    SUBSEQUENT
    EVENTS   F-45